UK hotel trading ‘unlikely to return to pre-pandemic levels by end of 2022’

Trading at UK hotels is not expected to return to pre-pandemic levels by the end of 2022 despite encouraging signs for hoteliers.

UK hotel trading performance is set to improve next year as demand continues to return after Covid caused the most volatile trading period, according to research from PwC.

The forecast for occupancy rates by the end of 2022 is between 70% and 90% of pre-pandemic levels in London.

In the regions, the forecast is higher at between 87% and 96% of pre-pandemic levels.

The speed of recovery will be the major issue in 2022, but will be driven by factors outside of the sectors’ control – the pace and size of the return of tourism, international and domestic business and events.

In an encouraging sign for hoteliers, 63% of people surveyed said they plan to take either more or the same number of holidays in 2022, according to PwC’s UK Hotels Forecast 2021-2022 analysis. More than a third (37%) still plan to holiday within the UK next year.

However, a difficult start to next year is widely expected, with the end of the majority of government financial support and rent and tax bills due.

Managing cash flow and operations will be critical to ensure success for hotels across the UK.

Rising payroll cost pressures are likely to continue into 2022 as labour shortages in hotels are at a critical level, leading to an above inflation increase in wage rates as hoteliers struggle to retain and attract staff.

PwC UK hotels leader Sam Ward said: “In what could be described as a perfect storm, a raft of operational cost increases coincide with the increase in the rate of VAT next April.

“The ability for hoteliers to endure these costs and preserve profitability, will present a challenge in markets where demand is weaker and more hotel rooms are available.

“Many businesses have publicly stated their ambitions to cut business travel even as restrictions are lifted. Hotels that previously focussed on the business market should think about how to capture domestic tourism, looking at this as a real opportunity and, as it returns, the international tourism market.”

London is projected to a moderate recovery with global tourism and air travel passenger numbers returning to two thirds of pre-pandemic levels and the successful vaccine rollout continuing to aid a gradual reduction in all restrictions and without further lockdowns.

The average daily rate (ADR) will recover to £112.26 in 2022, an increase of £27.78 over this year. This should drive an overall revenue per available room (revpar) of £63.69 in 2022.

Luxury hotels in the capital have seen occupancy as low as 18% so far this year, with an absence of high-spend tourists from the US and the Middle East.

Mid and budget range of hotels have fared best from domestic tourism demand.

As many businesses operate with hybrid working models for staff in the months ahead, demand will likely be subdued across both London and the regions for domestic business stays.

UK regions have seen mixed fortunes throughout the pandemic. Staycations have provided a significant boost for coastal and holiday destinations, with occupancy and ADR in August 2021 “significantly outperforming” the same peak summer month in 2019, but some cities and non-tourism destinations are still experiencing dampened demand.

Next summer may again see difficult trading conditions if international travel is back on and pent-up demand for guaranteed sun is released.

On balance, it is expected overall staycation demand to be similar to this summer’s levels but be more evenly spread throughout the year.

High occupancy rates will help regional hoteliers raise their ADR and a moderate recovery could see it reach £67.05  in 2022, up from £61.59 this year. Revpar could also rise to £42.36 in the regions.

The viability of large scale events, conferences and meetings with long planning cycles means the events market may take further time to recover, especially if uncertainty persists around potential restrictions.

Ward added: “The hotel sector recovery has a long way to go. The speed of recovery in the capital is likely to be dependent on international tourism and the speed at which business travel returns as markets lift their own restrictions on citizens travelling to the UK.

“Hotels must continue to innovate and adapt to the markets available to them.

“Recovery will not be easy or straightforward, but with the right planning and strategy, hotels across the UK can look forward to significantly better trading over the next 12 months.”


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