PwC?s UK hotel forecast ? congratulations and commiserations ahead for 2012 and 2013

According to new analysis, PwC expects the Olympics to turn 2012 into a record year for London with 2.8% RevPAR growth. Hotels should see a positive impact on occupancy of almost 1.2% in London and 0.9% in the Regions taking occupancy to almost 84% in London and 72% outside the capital.� If achieved it would be the highest annual occupancy seen in London since the 1970s and the highest ever in the Regions.
Robert Milburn, hospitality and leisure leader at PwC, said: ?All eyes will be on London this summer as the Queen?s Diamond Jubilee and the London 2012 Games attract the world?s interest. And without the boost to Q3 from the Games, London hotels would have been looking at a poor year with the impact of the harder trading environment being felt more keenly.?
ADR will be challenged by cost-conscious consumers and travel buyers seeking value and deals and the effect of lower spending visitors to the Games displacing the usual, higher spending summer tourists. In 2012 in London, PwC expects an ADR gain of 1.2% taking rates to over �135. We anticipate a further ADR decline in the Regions of 2.1%, where there has been no annual rates growth since 2008, taking ADR down to only �57.
Liz Hall, head of hospitality and leisure research at PwC, said: ?For London in Q3 we expect occupancy to hit almost 92% and with rates at �156 pushing RevPAR to almost �144, a growth rate of over 21% over Q3 2011.� Many operators expect trading to remain flat in London at best outside Q3 and we continue to forecast slight RevPAR declines in Q2 and Q4.?
For the Regions, PwC expects only a small demand boost from the Games. Weymouth, the football cities and other centres holding events should see a small occupancy uplift and some areas will be hoping to benefit from the staycation trends as well as the Diamond Jubilee and Farnborough International Airshow. There could also be some overspill from London.
Unlike London though, we do not see the small occupancy boost keeping rates or RevPAR out of negative territory. We anticipate ADR could fall by -2.1% during 2012 as a whole and RevPAR to fall by -1.2%.
2013 forecast
Looking ahead to 2013, lower demand and the east London supply spike look likely to depress trading in London. With no quick relief for squeezed consumer spending, a supply overhang and some difficult comparables in Q3, we anticipate a 3% occupancy fall to an average 81% in 2013. ADR also weakens by -3.4% which takes rates down to �130.80 ? �5 less than we expect this year. And a RevPAR decrease of -6.7% takes RevPAR down to �106.16.
Robert Milburn, hospitality and leisure leader at PwC, added: ?Regional hotels could at last see some rates growth in 2013.� Historically the impact of branded budget development has supported occupancy while weak economic growth, oversupply in some cities and the tide of branded budgets have depressed rates in the Regions. In 2013 we think this may change with rates rising by 2.4% but occupancy falling marginally by -0.3%."
Commenting on new hotel supply and the outlook for these hotels, Liz Hall, head of hospitality and leisure research at PwC, added: ?We believe the large supply spike at a time of a more uncertain economic and travel environment is unlikely to mean a merrier competitive environment around the country and especially in London.?What is surprising perhaps is the high proportion of budget hotels that are being developed in London. In the last three years London has seen a 13% increase in the number of budget rooms and will have approaching 24,000 budget rooms by the end of this year.?
Budget rooms comprise almost half the total pipeline for even the Central zone. In the East it?s around 51% and in the West 41% of the 2012 pipeline.� In the North and South budgets currently comprise 100% of all the [new] rooms.
Robert Milburn, hospitality and leisure leader at PwC, concluded: ?Many operators are positive about London?s prospects after the Games, encouraged by the global awareness of London as a destination and the ongoing improvements in infrastructure. Others, however, have voiced concerns about the supply spike and how it will be absorbed. If there is a post-Olympic travel dip, trading could get very difficult ? especially in East London. At the end of the day, it all depends on whether the economy perks up.?
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