PwC forecasts record breaking occupancy levels

Multinational professional services network, PwC has predicted UK regions will see the highest ever occupancy levels and record ADR rates in their latest European hotel forecast.

Following a good year for the hotel industry in 2014, the improving economic and business travel backdrop is expected to continue to drive growth through 2015 and into 2016.

In 2015, the top cities by revenue per available room (RevPAR) growth are Dublin (8.8%), followed by Madrid (5.6%) and London (4.6%), then Rome (3.8%), Prague (3.7%), Porto (3.7%), Amsterdam (3.6%), Barcelona (3.5%) and Edinburgh (3.5%).

In 2016 Dublin (8%) is forecasted to top the RevPAR growth league, followed by Madrid (4.8%), London (4.7%), Rome (4.4%), Milan (4.1%), Barcelona (3%), Edinburgh (2.7%), Berlin (2.6%) and Porto (2.6%).

London hotels are predicted to see occupancy rates of 84% in 2015, its highest for almost 20 years, which will result in the city’s average revenue per available room (RevPAR) reaching £122 this year and £127 in 2016.

As for UK regions, the forecast is for more strong growth, with occupancy forecast to increase by almost one percentage point to 76% in 2015 giving hoteliers the confidence to raise rates upwards to drive 5.4% and 5.1% RevPAR gains in 2015 and 2016.

PwC expect an additional 6,430 rooms to open in London this year, taking the city's hotel rooms supply total to almost 136,000 rooms. The supply pace is accelerating in the regions too and growth in new supply could reach 2% as a further 9,420 rooms open in 2015.

Commenting on what’s driving growth, Liz Hall, head of hospitality and leisure research at PwC, said: “Growth is being driven by a combination of higher average daily rates (ADR) and occupancy levels. In some countries, higher occupancies reflect a structural shift towards more branded budget hotels as well as access to online distribution channels and greater propensity to travel. In many top performing cities - like London and Paris - which operate at over 80% occupancy, this gives hotels the confidence to raise rates and it’s ADR driving the most growth.

“Many cities are benefitting from improving economic conditions in the Eurozone and a recovery in business travel. Travel is likely to benefit from the likely depreciation of the euro, arising from the ECB’s QE programme. Many visitors come from outside Europe and the improving economic situation in the US should lead to more tourists. Some cities will also receive a welcome boost from events such as the Rugby World Cup and the NFL International series (London); Milan will see EXPO 2015 and Berlin will host the UEFA Champions League final.

“Casting a shadow over growth prospects is the constantly changing balance of global growth and geopolitical risks, which will determine the global economic outlook for 2015 and this will have implications for travel and hotels in the cities analysed.”

In 2015, occupancies are forecast to be above 80% in three cities - London (84.3%), Edinburgh (81%) and Paris (80.5%). In 2016, most cities see further growth but there will be no change in the top rankings – London (84.6%), Edinburgh (81.3%) and Paris (80.9%).


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