Professional services firm PwC has this week updated its forecasts for 2013.
The hotel team at PwC are now predicting a drop in occupancy to 70 per cent in the regions and 79 per cent in London as well as 1.2 per cent drops in average daily room rates (ADR) leaving rates at £58 in the provinces and £137 in the capital.
Tough going
Driven by more supply and greater competition, hotel revenue per available room (RevPAR) will drop by 1.4 per cent in the regions and 3.2 per cent in London, according to PwC. If correct, RevPAR will stand at £108 in the capital and £41 elsewhere.
"This updated UK hotels forecast reflects our latest thinking on hotel performance in 2013, with the outlook now impacted by weaker UK economic prospects but also supported by a weaker pound,” said PwC.
“While we still anticipate overall trading declines in 2013, these falls are less sharp for London but more unfavourable for the provinces than we predicted in November.
“The revised forecast expects UK hotels to continue to struggle to overcome the impact of weaker demand at home and in major inbound markets.
“This will be driven by: the Eurozone crisis; continued cuts in the public sector; an unrelenting squeeze on household incomes and confidence, and further above average supply additions in London and some other UK cities.”
Encouraging
Despite the gloom, in its 2013 Hotel Yearbook, also released this week, global hospitality consultancy firm Horwath HTL said there were positive signs on the horizon.
“London occupancy is expected to fall marginally in 2013 as the fallout of the Eurozone crisis is felt and further new room supply enters the market, even though dissuaded travellers are likely to return,” the report said.
“Nonetheless, tour operators which avoided the capital in 2012 are expected to return to London in 2013 – which is encouraging.”
Outperform unbranded
However, echoing other reports, the firm said provincial independent hotels would suffer in the year ahead.
“Across the regions particularly, the speed of economic recovery will be the biggest influencer for business travel going forward, and given the UK’s sluggish and patchy recovery, companies are likely to remain prudent and cost conscious.”
“The south east (excluding London) is expected to recover more quickly than the rest of the UK, and those hotels which have international brand affiliation are likely to outperform the unbranded offerings.”
Investors
Both reports agreed that high investor demand in the UK hotel industry, particularly in London, was likely to remain.
Speaking ahead of next week’s International Hotel Investment Forum in Berlin, Sophie Perret, director at HVS London, said 2013 would see continued investor interest in London as well as Birmingham and Manchester.
“It is difficult to imagine that investor appetite for London and Paris can ever fade,” she said. “Not only are they important business and financial centres, but their cultural and historic attractions make sure that both cities can keep attracting leisure visitors.”
Hotel crystal ball - other predictions for 2013:
- Business visitors expected to return to London
- Weak pound to benefit UK tourism
- Post-Olympic oversupply anticipated in London as a result of new openings
- New hotels in Birmingham, Newcastle, Bath and Liverpool predicted to put pressure on older venues
- Continued rebranding expected in the regions as operators restructure and refresh portfolios