UK hotel performance to slow down in 2018

20 September 2017 by
UK hotel performance to slow down in 2018

UK hotels are forecast to experience a slowdown in performance next year due to a decline in economic growth, the slowing of the weak pound effect on inbound tourism and a large increase in room supply.

The predictions are made by accountancy firm PwC in its annual hotel forecast for 2018.

Hotel performance in London is set to remain positive, with year-on-year occupancy growth of 2.3% forecast this year up to 83%, with a marginal increase of 0.2% expected next year. Average daily rate (ADR) is set to increase 3.6% this year to £145 and a further 2.2% in 2018 to £148. As a result, revenue per available room (revpar) is expected to grow by 6% this year and 2.4% next year, rising to £120 and £123 respectively.

Meanwhile, regional cities that have performed well this year include Cardiff which saw revpar increase by nearly 11% in June as a result of hosting the Champions League Final in June. Hull saw a 13% lift in occupancy after being awarded the City of Culture status in 2017, and Edinburgh and Belfast have seen ADR gains of 15% and 13% respectively.

The predicted slowdown in performance is partly due to the extra 19,000 bedrooms that are to be the added to the UK hotel sector in 2018, according to data from AM:PM. London will drive the expansion with an additional 7,000 new bedrooms, while Manchester, Belfast, Glasgow, Edinburgh, Liverpool and Bath will lead the regional growth.

Liz Hall, head of hospitality and leisure research at PwC, said while the weak pound had encouraged record numbers of international leisure tourists to visit London in 2017, it does not appear to have boosted corporate business from abroad "perhaps reflecting corporate uncertainty around Brexit".

She added: "While the pound is bringing leisure tourists in, it is also creating a harsher environment for hoteliers as they have to contend with rising costs and squeezed margins with the weak pound pushing up the cost of imported goods.

"There are also labour issues. The Brexit vote has prompted some workers from EU countries to leave their jobs and some hotels are struggling to fill these vacancies and facing higher costs when they do so."

Hotel deals, which are expected to rise 43% year-on-year in 2017 to around £5.3b, are forecast to be 10% lower next year at around £4.8b. Further overseas investment is expected during 2018, but China placing limits on foreign investment and slower revpar will slow the pace that has been seen this year.

PwC confirmed that the London and Manchester terror attacks had had limited impact on hotel performance.

London expected to record Europe's second highest occupancy rate in 2017 >>

PwC predicts record occupancy levels for provincial hotels >>

London forecast to achieve Europe's highest hotel occupancies in 2016 >>
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