London hoteliers saw a record 2014 but so far 2015 hasn’t replicated this stellar performance, according to new PwC analysis. While average performance metrics are still very high by most global city standards, the pace of growth in London in the first half of 2015 has been mixed. Demand is still strong but the falling Euro is a key issue.
Overall for 2015, PwC expects London to see occupancy growth of 1% taking occupancy to 84%. ADR growth is forecast to be 1.8%, taking ADR to £142. The increase in occupancy and ADR is partly due to the Rugby World Cup in the second half of 2015. This drives RevPAR growth of 2.7%, taking RevPAR to £119.
Looking ahead to 2016, the company forecasts more growth but at a slower pace with marginal occupancy growth of 0.3% that will keep occupancy at 84% and a 2.2% growth in ADR which will mean rates of £145. This combination will drive RevPAR growth of 2.3% to take yields to £122.
Liz Hall, head of hospitality and leisure research at PwC, said: “London occupancies have averaged 80% or above since 2006 and our annual forecast for 84% this year and next would be the highest this decade.
“Growth isn’t being experienced evenly by all market segments. The recent variable performance in London in the first half of 2015 has shown some polarisation in performance with the middle segments hurting the most. Is the increase in budget rooms upsetting the apple cart in London and creating this middle market squeeze?”
The regions
The regions have experienced a very good-year-to-date. Around the country, most cities have continued to see very strong RevPAR growth. Growth has come from a mix of occupancy and ADR, but particularly from rates. Exceptions include Aberdeen, which has seen both occupancy and ADR falls drive an 18% RevPAR decline to June. Many cities continue to see double digit RevPAR growth, including Belfast, Bristol, Birmingham, Coventry, Liverpool, Nottingham, Plymouth and Southampton.
Overall strong trading and low supply mean that for 2015 PwC expects 1.6% occupancy growth, taking occupancy to 76% and ADR growth of 4.6%, taking rates to £67. This mean RevPAR growth will be 6.3%, nudging RevPAR to £51.
Liz Hall, head of hospitality and leisure research at PwC, added: “Growth is still in the air and there is more to come, but the pace of growth is slowing a bit now in the regions. This is not surprising, we have seen 32 months of occupancy growth. UK occupancy levels are at record highs with ADR heading in the right direction in the regions. It’s getting harder, but even slower growth is a good result for hotels.”
PwC forecasts further growth in 2016, but just not at the same pace with a 0.6% gain taking occupancy to 77%. ADR growth is predicted to fall to 3.5%, taking rates too£69. This means RevPAR growth of 4.2%, taking RevPAR to £53.
The Rugby World Cup – up or under?
The Rugby World Cup started this month and will provide a fillip for UK hoteliers. The event will be held across the country in Birmingham, Brighton, Exeter, Cardiff, Gloucester, Milton Keynes, Leicester, Leeds, Newcastle and Manchester as well as London. With a third of matches set to be played on a Sunday – traditionally a low occupancy night – the event is a great opportunity for hotels, although, there are fears the event could put off the corporate market at a traditionally busy time.
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Get full report at: PWC Hotel Forecast 2016
Read full article at: eHotelier
