London hotel rates fall to 2005 levels

London hotel rates fall to 2005 levels

Room rates in London hotels have fallen to levels last seen in 2005, according to a PricewaterhouseCoopers report.

London hotels have experienced record falls in RevPAR (revenue per available room) since the ongoing rise in room rates came to a halt in the last quarter of 2008.

The economic downturn and fall in consumer spending will continue to take its toll on travel demand throughout 2009 with room rates and RevPAR for each quarter getting progressively worse to the end of the year, said PwC. Quarter two is expected to see a particularly marked deterioration.

PwC predicts the city could now see a 14.2% decline in room rates (to £100.31), and a 13.3% drop in occupancy, to around 69%. Occupancy in London has not been this low since 1992.

UK cities outside London are also predicted to suffer more severely than anticipated, with RevPAR forecast to fall by 11.6 per cent this year, having already seen three quarters of RevPAR decline in 2008.

PwC hospitality and leisure leader Robert Milburn said:  “In quarter four of 2008, corporate Britain sat up and realised just how bad things were going to get. Given that hotels normally lag the cycle by two quarters, we are likely to be on the cusp of the worst few months of the year for hotels.

“London in particular is likely to suffer at the hands of the increasingly cost-conscious corporate market, which is now demanding even lower rates, or cancelling altogether.”

However, the budget hotel sector is expect to perform better during the downturn. In a PwC survey of UK hotel owners and operators, 75 per cent polled believed budget hotels will be more resilient than other sectors.

PwC head of research Liz Hall said: “In the early 90s recession branded budgets were only just getting going with less than 10,000 rooms. Now with nearly 85,000 rooms to choose from, this value alternative is widespread and is already mopping up cash-strapped business travellers.”



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