Hotel sector to grow in 2014, but guests will still expect a bargain

The business advisory firm’s latest hotels forecast predicts a return ‘to some kind of normal’ in 2014 following the impact of the economic downturn and the London Olympics on the industry, but warns that some areas of the business, such as meetings and conferences will remain unsettled.

In London ADR is expected to rise by 1.5 per cent next year to £138.19 while it is expected to reach £60 in the regions.

RevPAR in London will grow 2.4 per cent to £112.80 while the regions can expect growth of 1.8 per cent to £42.44.

Record levels​

In both instances the rise is a record since 2008, says PwC’s head of hotels Robert Milburn who remains ‘cautiously upbeat, but increasingly optimistic’ on the outlook of the UK hotel market for the year ahead. 

“Historically there has been a close relationship between RevPAR and GDP growth, so a sustained recovery in GDP should lead to increased levels of room demand and revenue growth in the following years,” he said. 

Late booking bargains​

While growth is predicted, PwC's head of hospitality and leisure research Liz Hall, warned hoteliers to expect it to be slow as guests continued to expect a bargain. 

“The UK is already on a recovery track but growth is likely to be slow by historical standards," she said. "Across the UK, there are still continuing pressures on room rates. This is unlikely to change as consumers push back, book late in the hope of a bargain and use the pricing transparency of the internet to help them make a choice.

"Short lead times, a push for added value and the attitude that a better deal is to be had through booking late looks likely to continue.”

Hall also said the meetings and conference sector, which has experienced a recent upturn, had not yet fully recovered and would remain unsettled through 2014 unless hoteliers could adapt to changing demands. 

“The meetings and conference market faces another challenging year, and is often the last demand segment to recover," she said. "More supply and changes to corporate procurement policies and sustainability issues around travel and communications technology are still leaving their mark. 

"Shorter lead times, shorter meetings (more day and half day events), and clients wanting more for less and in less time, are also trends.” 

PwC's hotels forecast is based on a quarterly econometric analysis of the hotel sector, using an updated PwC macroeconomic forecast released in September and historical statistics supplied by STR Global and other data providers. PwC expects real gross domestic product to increase by around 1.3 per cent in 2013, and then accelerate to a growth of around 2.3 per cent in 2014.