Supply and demand growth predicted for UK hotels in 2013

The forecast, published in conjunction with Tourism Economics, says that supply in London will grow by 3.5 per cent, while demand will grow by 2.9 per cent. RevPAR in the capital is predicted to increase in June and July, driven by a surge in occupancy from the return of the regular summer guests.

And outside of the capital, supply is forecasted to grow by 1.4 per cent, with demand growing by 0.6 per cent. RevPAR is expected to increase, albeit marginally, by 0.9 per cent to an average of £41.54.

But, in the first few weeks of what many hoteliers are referring to as ‘Empty 13’, many industry experts have predicted a mixed year.

Olympic hangover​

Russell Kett, chairman of hotel consultancy business HVS London, believes that many businesses will ‘struggle through’ 2013 in need of both consumer and investment.

And, while London is likely to experience strong demand, he says that ‘businesses in the capital are unlikely to achieve anywhere near the premium rates they did during the Olympics’.

“Outside London is another matter,” he added. “Apart from a handful of locations such as Edinburgh, many UK provincial hotels will struggle through 2013 in need of both customers and investment.

“Several owners, whether individuals or banks, will seek to sell their distressed businesses, but buyers will find it hard to secure meaningful levels of debt, which may cause price reductions in some cases.

“Hanging on and waiting for the market - and hotel values - to pick up will become the only strategy for the more fortunate of these owners.”

Strong buyer interest​

Kett did say there was hope on the horizon, with the potential for more hotel transactions as buyer interest remains strong and some debt becomes available.

Longer term, he believes luxury hotels will seek to differentiate themselves by developing new levels of ‘comfort’.

“Over the next five years I expect the world's most successful luxury hotels to provide levels of service which ensure these hotels are properly differentiated from simply 'ordinary' luxury hotels.

“These will be hotels where high prices can be achieved for their rooms, restaurants and bars, yet guests feel they are receiving superlative value for money.”

Kett’s remarks follow in the footsteps of PwC’s recent European hotel forecast, which concluded that hotels in London will likely face a weaker trading market this year; with an Olympics hangover combined with depressed occupancy levels and room rates holding back the capitals hoteliers.