Hotel industry 'over the worst' predicts report

The UK hotel industry may have seen the worst of the recession, according to a new report, with revpar decline expected to slow up early next year and three quarters of leading hoteliers feeling more optimistic about business than six months ago.

PricewaterhouseCoopers' report UK hotels forecast: Not out of the woods​ yet predicts a revpar fall of 12 per cent overall this year which it expects to slow to a 2.4 per cent decline in 2010, although rates are expected to fall further before Christmas.

Robert Milburn, UK hospitality & leisure leader at PricewaterhouseCoopers LLP, said: "While rate declines will slow at last, economic and travel fundamentals remain weak and despite accelerating cost cutting programmes, the evidence points to more savage trading at the end of the year. Rate declines will ease in 2010 but we foresee no revpar growth in any quarter over the year."

Milburn said London's hotel market had not been hit as severely as had been expected, partly due to many hotels offering bargain leisure deals to guests. Occupancy is also expected to remain high at around 79 per cent for this year and next.

"Visitors are keen to take advantage of this lower priced London as the city slid from second to 22nd in the league table of the world’s most expensive destinations. But it remains to be seen how long these hotels can afford to offer such attractive rates," he said.

The report said that midscale hotels had managed to stop regular customers from switching to budget hotels by offering them discounted rooms, but warned that the practice may not be able to continue without hurting profits.

"Rooms rates have become the sacrificial lamb in the battle for occupancy, and keeping rates low will continue to make it easier to attract last minute custom," said Milburn. "It is a delicate balance and we are not out of the woods yet but, as the economy starts to stabilise, the path has at least become clearer."