A surge in room supply, slowing global and UK economic growth and ongoing Brexit uncertainty means the outlook for hotel trading this year remains flat.
A combination of all the factors is expected to provide a “challenging environment for performance growth,” according to PwC’s latest UK hotels forecast.
The report published today (Tuesday) shows that London should still experience high occupancy levels but growth this year will be marginal at 0.3% due to the impact of high room supply levels.
Average Daily Rate (ADR) is forecast to continue to grow by 1.4% in London for the next two years taking it up £2 to £151 in 2019 and £153 in 2020.
Gains in ADR will drive revenue per available room (revpar) growth by 1.7% in 2019 to £126.
A further 1.4% rise is projected to take revpar to £128 next year.
However, January data shows that the regions are seeing softer demand and we this is expected to continue as high numbers of extra rooms added in many cities continue to affect hotel trading.
PwC head of hospitality and leisure, David Trunkfield, said: “London saw stronger than expected demand in the last three months of 2018 which transformed the year for the capital.
“Early signs in 2019 are that January has continued to see some good growth, with record occupancy levels and ADR gains driving revpar growth to over 5%.
“Weekend demand remains strong and the weak pound continues to support tourism and hotels, however there are worries that tourists, especially from the EU, may adapt a ‘wait and see’ attitude towards visiting the UK in 2019.
“While new supply grew by 2% in 2018 it is forecast to increase by a further 4% in London this year and with uncertain demand, weaker corporate travel trends and no blockbuster events scheduled this year, this could dampen hotel performance.”
He added: “The regions have enjoyed solid revpar growth in recent years but 2019 is looking more difficult as domestic economic growth slows and high levels of new supply dampen hotel trading.
“While demand should be supported by festival, exhibitions and events around the country such as the ICC Cricket World Cup, the increase in new rooms remains a concern in many cities.
“A 3% increase in supply is expected in the UK as a whole this year. Edinburgh has seen around 3,000 new rooms open over the past five years and is expected to see a further 2,000 rooms open over the next two years.
“If trading weakens as we expect it will become harder to fill all the new rooms around the country.”
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