London Boosts Uk Hotels Market But Cautious Times Ahead | PricewaterhouseCoopers Forecasts
The UK hotel sector is continuing its stellar performance of recent years but may be approaching uncertain times, according to the latest PricewaterhouseCoopers LLP Hospitality Directions Europe - UK Hotel Forecast.
UK revenue per available room (RevPAR) is forecast to grow by a respectable 6.2 % in both 2007 and 2008 while in London RevPAR should grow 10.6 % in 2007 and 9.2 % in 2008.
Occupancy levels in the UK will remain flat at about 75 % over this period, but the sector is benefiting from a strong economy and in the luxury hotel market average room rates could hit £360 in the capital next year.
Robert Milburn, UK hospitality and leisure sector leader, PricewaterhouseCoopers LLP, comments:
“We should see another two years of good performance for the UK hotel sector but it will be highly dependant on London’s performance and as we know, the storm clouds may well be gathering on the back of the credit crunch currently occupying the headlines.
“One area that looks set for continued growth, though, is the luxury hotel market, [as our Jewels in the Crown article predicts. With room rate growth of 17.4 %, an increasing number of high net worth individuals and a more affluent mass consumer market, it is no surprise that major luxury hotel chains are jostling for position in the capital.”
Liz Hall, head of hospitality research and editor of Hospitality Directions Europe, PricewaterhouseCoopers LLP, adds:
“Room rates have increased for the past three years in the provinces and for the past six years in London, which is helping make the capital one of the most profitable hotel markets in the world.
“In terms of RevPAR, this has been a story of growth-on-growth but it does now look like levelling off. If events in the markets mean the corporate world stops travelling, the industry could start to feel the impact.”
Despite an uncertain future and high barriers to entry, there is still plenty of proposed development in the UK. London has 11,300 rooms under development and there are a further 35,000 rooms planned for the rest of the UK between 2007 and 2008.
City Forecasts
London had another stellar year driven by strong corporate demand, economic conditions and room rate gains. Occupancy levels are expected to be flat for the next few years and hover around 82 % in 2007 and 2008. Average room rates are anticipated to increase to £118.55 in 2007, rising to £128.35 by 2008. Records could be broken next year as RevPAR passes £100 for the first time.
Edinburgh has become the UK’s second tourist destination with about 3.8 million tourists a year. The city is taking full advantage of this with RevPAR growth of 4.3 % in 2007, easing to 3.4 % in 2008. This growth will be driven primarily by room rate gains and the corporate market.
Manchester is now a favourite with visitors and has attracted major events including the Manchester International Festival this year and the Labour Party conference in 2008 and 2010. PricewaterhouseCoopers LLP expects RevPAR growth in 2007 of 4.1 % and a further 5.2 % gain in 2008. However, the city could be facing a difficult time ahead with a 15 % increase in rooms planned over the next two years and falling occupancy levels in recent months.
Birmingham generates about £1 billion from conference and event accommodation and will host the Conservative Party conference in 2008 and 2010. Growth is slowing this year with only 0.8 % RevPAR growth forecast but it should see increased growth of 4.7 % in 2008, largely due to conference related activity.
Provinces Forecast
Depending on location, provincial prospects are expected to be more mixed with RevPAR gains of 3.8 % in 2007 and 4.7 % in 2008. This growth is largely driven by room rate gains of 3.4 % in 2007 and 4.1 % in 2008, taking room rates to £71.16. Occupancies are likely to remain around a healthy 72 %.
- ‘Hospitality Directions Europe – UK Hotel Forecast’ can be downloaded at
. Copies for the media are available from Rohan Hutchings, PricewaterhouseCoopers LLP on +44 (0) 20 7804 7509 or [email protected] - ‘Hospitality Directions Europe – Jewels in the Crown: Trends and outlook for Europe’s luxury hotel sector’ can be downloaded at
. Copies for the media are available from Rohan Hutchings, PricewaterhouseCoopers LLP on +44 (0) 20 7804 7509 or [email protected] - A podcast discussing the UK hotel forecast and the performance of Europe’s luxury hotel market is available at
. - Revenue per available room (RevPAR) is a key performance metric for the hotel industry. Also known as yield, it can be calculated by multiplying the average achieved room rate by the average annual room occupancy rate.
- Economic forecast data is sourced from Oxford Economics.
- The UK Hotel Forecast charts hotel statistics for the UK - London, Birmingham, Manchester, Edinburgh and the Provinces.
- Launched in January 2000, PricewaterhouseCoopers Hospitality Directions – Europe Edition is a biannual research journal, with quarterly forecast updates, offering original research on the European hotel industry. The journal draws on PricewaterhouseCoopers economic modelling skills and industry knowledge.
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