London hotels suffer 9% occupancy drop in June but capital's pipeline leads Europe

19-Jul-2012 - Last updated on 27-Aug-2024 at 18:02 GMT

Buffeted by poor weather and economic headwinds from mainland Europe, London's hotels suffered a 9 per cent drop in occupancy in June

Occupancy among hotels in the capital dropped 9 per cent in June as the Diamond Jubilee failed to cancel out growing economic problems in Europe, however London and the UK continues to lead the continent in pipeline terms.

According to the latest figures from PKF Hotel Consultancy Services, hotels in the capital saw average room rates rise marginally to just under £167.

However a significant drop in occupancy resulted in a fall in room yields, or revenue per available room (RevPAR), to £136.87. A drop of 7.1 per cent from a year ago.

Intensified problems

Although exercising caution that occupancy still remains high, Robert Barnard, partner for Hotel Consultancy Services at PKF, described the fall as 'noticeable'.

"A lack of confidence in the domestic economy and the Eurozone’s on-going problems, which intensified in June, will have undoubtedly contributed to these results. Europe accounts for as much as 75 per cent of our overseas visitors, so the UK hotel sector will be hit if businesses and individuals in struggling EU countries cut back on their spending."

Despite tourists from the so-called BRIC nations adding to hotel revenues, many operators still rely on those travelling across the channel.

Poor results across the UK last month are also blamed on the rain and the lull before the London 2012 Olympic Games storm which many operators are hoping will reverse negative trends.

Away from the capital, occupancy dropped by 3 per cent which more than cancelled out a marginal rise in room rates to £61.64. The figures left RevPAR down 2 per cent based on last year's figures - it now stands at £46.82.

Development pipeline

However the picture for UK hotels is not altogether gloomy. Last month BigHospitality reported a number of London hotels were experiencing a post-Games boost in trade pointing to a possible strong Olympics legacy.

The latest development pipeline figures from hotel analysts STR Global show the UK is leading the way in new hotels coming on stream with 8,743 rooms under construction last month.

The statistics indicate the country is leading Europe in new hotels suggesting a buoyant future for the industry.

A point echoed by hotel property specialists Jones Lang LaSalle which said the capital added 2,000 rooms to its supply in the first five months of the year.

Accelerate

Although Jon Hubbard, EMEA chief executive of Jones Lang LaSalle Hotels, warned 2013 may bring more challenging conditions for hoteliers, he said hotel development activity was likely to accelerate in the second half of this year.

"Going forward we expect London to demonstrate growth in the hotel sector as its economy continues to strengthen compared to other European cities, although market dynamics will soften in the medium-term. We expect the games to generate additional demand for both the London and provincial United Kingdom hotel market during the summer months."

Although Jones Lang LaSalle said both budget and upscale hotel segments were growing in the capital, competition was strongest among budget hotels as the fight for London between Premier Inn and Travelodge hots up.

Hoteliers will be hoping the Olympics and a strong pipeline translate into better occupancy and RevPAR figures in the second half of 2012.