Room rates in London are due to go up in 2014 and return to the Olympic highs of last summer, which may impact business travellers, a new report shows.
The PricewaterhouseCoopers 2014 hotels forecast paints a “cautiously upbeat” picture of future prospects for the sector in the capital and UK regions.
This follows an expected 1.9% decline in revenue per available room (revPAR) in London this year due to comparisons with the Olympics in 2012 and a 1.3% gain in the provinces.
RevPAR in London is expected to rise by 2.4% in 2014 to £112.80 with further growth of 1.8% to £42.44 at hotels in the provinces.
PwC said: “We remain cautiously upbeat rather than wildly optimistic about improved prospects and revenues for hotels.
“Hoteliers continue to face a challenging time in an uncertain world where the tailwinds that supported economic growth prior to the financial crisis have been replaced by global and local headwinds that are contributing to a ‘new normal’ of low growth for western economies.”
Business travel is forecast to pick up faster that leisure travel, where improving economic prospects will take longer to feed into discretionary income gains, the report says.
“Meetings and conferences are an important driver of demand and food and beverage spend for hotels, but again the outlook is far from recovered, nor is it likely in 2014,” PwC says.
“Mastery of the digital space is essential for future success but identifying the real opportunities is not always easy – Accor’s recent decision to offer free wi-fi across its properties has put pressure on other operators.
“At the same time the cost of operating hotels continues to increase, squeezing margins across most areas of the business including food and drink, energy, technology, social media and so on.”
The 2.3% GDP growth forecast by PwC for next year would be strong by the standards of the current recovery but is weaker than any year between 2022 and 2007, the report points out.
The average daily rate achieved by hotels in the capital is expected to drop by 2.3% this year but rebound modestly by 1.5% in 2014 taking rates to £139.19, just £1 below record levels seen last year but £6 behind in real terms.
Faster rates of growth is the regions over the next two years are expected to come from the South and the Midlands.
“However, all regions should follow the same broad upward trend and this will help support travel and hotel performance,” according to the report.