Hoteliers have their work cut out over next year, says PwC

By Lorraine Heller

- Last updated on GMT

RevPAR in London hotels increased 11% in the first five months of this year
RevPAR in London hotels increased 11% in the first five months of this year
Hotels in the UK have been through a volatile six months, and although revenue is likely to continue growing the landscape ahead will be challenging, said PricewaterhouseCooper (PxC) in its latest report.

London hotels increased RevPAR (Revenue per Available Room) by over 11 per cent in the first five months of the year, but hotels outside London only just managed to keep RevPAR growth positive, while room rates declined.

“Hotels have delivered somewhat volatile trading data so far this year. In January and February, London demand dipped, but a strong March, a sparkling April and a spectacular May suggest London’s juggernaut run isn’t ready to stop just yet,” said Liz Hall, head of hotel research at PwC.

She warned, however, that growth has been held back by unexpected circumstances, such as consumer spending contraction earlier this year, and that the landscape ahead remains challenging.

“There remain plenty more headwinds to confront and much to worry about that could derail the sector’s progress,” said Hall.

“Consumer confidence remains fragile; there is further possible fallout from the ‘Arab Spring’ and much uncertainty and potential unrest around global commodity prices including oil; supply too may dampen hotel performance pre and post the Olympics.

“So looking ahead hoteliers could have their work cut out.”

Occupancy

PwC’s data for the first six months of the year reveals that although London hotels continue to perform better than the regional market, the capital was still hit by unexpected low occupancy earlier this year.

In January and February of 2011 London saw occupancy declines of 2 per cent and 3.8 per cent respectively, taking occupancies to 69.2 per cent and 75 per cent respectively.

Although occupancies were back up at almost 85 per cent by May, April’s results were somewhat disappointing as the Royal Wedding did not attract the volumes anticipated.

“Nevertheless, and despite the impact to corporate business from the protracted Easter shutdown, it was a very good result as occupancy in April recovered to grow by 3 per cent to 79.9 per cent and ARR saw further strong growth of almost 12 per cent driving a 15 per cent gain in RevPAR to £100,” said PwC.

Rates

Rates were strong for London over the first six months this year, with a particularly robust May (19.3 per cent rate increase) driving up RevPAR by 20 per cent.

Outside London, the picture was again very different, with hoteliers just managing to keep RevPAR growth positive in the five months to May.

However, regional average room rate (ARR) still fell by 1.9 per cent in April and a further 0.5 per cent in May, despite easier comparables, said PwC.

“This makes achieving our 2011 forecast for UK hotels challenging for the regions, especially on rates, but our forecast is still achievable for London where in the five months to May we have seen double digit growth already - equivalent to that seen in 2010 as a whole,” said Hall.

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