PwC forecasts record year for London hotel rates

According to PwC's latest European Cities hotel forecast London is set for a record breaking 2014, with RevPAR (revenue per available room) growth of 3.8 per cent as rates and occupancy hit new highs.

The European cities hotel forecast ranks 18 gateway cities across Europe. The top RevPAR growth stories in 2014 are likely to be Dublin, London and Paris. According to the forecast, London is set to see the highest occupancies in 2014 and top the RevPAR growth table in 2015.

Liz Hall, Head of Hospitality and Leisure Research at PwC, said a mix of Average Daily Rate (ADR) and occupancy were driving prices, although in many cities ADR is the stronger metric: “This is true in cities like London where, despite a high supply pipeline, occupancy is already very high and the city is virtually full up mid-week. By contrast, it’s largely occupancy driving growth in Lisbon and Milan.
“Supply will cast a shadow in some cities; high levels of new supply could drag down performance in off-peak times. Moscow, Amsterdam, London, Berlin, Edinburgh, Zurich and Vienna have some significant pipelines, some above the long term average.”

The improving economic and travel backdrop has helped rejuvenate trading in all but one (Madrid) of the 18 cities analysed. But the pace of growth varies from city to city and the challenge for hotels will be to capitalise on this improving climate while responding to the megatrends impacting their business.

London continues to be buoyant with the economy doing significantly better than the rest of the UK. The capital attracts a growing number of tourists and property prices and consumer spending continue to outperform the rest of the country. Unemployment in the UK is expected to decline, and GDP growth is expected to be around 2.5% in 2014 and 2.4% in 2015.

Commenting on what London can expect in 2014 and 2015, Liz Hall, said: “There are plenty of events to draw in visitors and a relaxation of Chinese visa rules will also be positive.

“London soaks up the new supply but off-peak it could be challenging, the high proportion of budget supply could prove challenging. In 2015 hoteliers should have more confidence to increase rates, especially if 2014 turns out as expected with a stronger swing to a seller’s market.”

In the regions, PwC anticipate 2013’s healthy growth will be sustained in 2014, albeit at a slower pace with RevPAR growth of three per cent taking RevPAR to £44.60, the highest since 2007 in nominal terms.  Occupancy is expected to keep nudging up.

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