Economic concerns will hit hotel growth

Growth in the hotels market will flatten next the year, because of economic uncertainty and an influx of new rooms, according to a report by business services company PwC.

The Hotels Forecast 2019 study estimates that occupancy levels in London will rise just 0.1% year-on-year in London, and fall 0.5% forecast in 2019. It means that occupancy in 2018 will be 82%, and 81% in 2019.

The Average Daily Rate (ADR) is on target for 0.2% growth in 2018 – rising to £149 – and then up 0.8% for 2019, taking the average rate up another £1 to £150.

Revenue per available room (RevPAR) growth will be 0.3% for both 2018 and 2019, a big contrast to the 4.6% growth in 2017.

Overall, RevPAR is expected to remain at £122 for 2018 and 2019.

Liz Hall, head of hospitality and leisure research at PwC, said: “Last year was a hard act to follow for hotel trading, in terms of growth and 2018 has been held back by uncertainty, slower economic growth, significant supply additions and reported stuttering business travel.

“This is despite the weak pound buoying leisure travel, the Royal Wedding and the International Farnborough Air Show effect.

“However, trading in absolute terms remains extremely high by historic and global standards for London and by 2019 we forecast both ADR and RevPAR to reach new records in nominal terms.

“For a sector heavily reliant on people to deliver its products and services, the shortfall in availability of EU nationals remains a concern for hotels and the weak pound has pushed up the costs of retaining staff and importing goods within the sector.”

Meanwhile, occupancy levels in the regions have been averaging 76% since 2015. PwC forecasts a 0.3% decline in 2018 and no growth for 2019.

ADR will rise by 1.3% to £72 and then a further 1.2% in 2019 lifting rates to £73.

RevPAR is forecast to see a 1% uplift and a further 1.2% in 2019 taking it to £55, up from £54 in 2017.

Hall said: “Demand continues to be driven by inbound tourism, domestic holidays and events. The ICC Cricket World Cup is being held across 11 locations in England and Wales which could help regional hotels in 2019.

“Occupancy rates have been creeping up from 66% in 2009 to an average of 76% in 2015. We forecast rates to remain at this level despite over 40,000 rooms to be added in the regions in 2018 and 2019. A continuing structural supply shift towards a greater proportion of budget rooms will sustain occupancy levels.”