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The falling of the euro has been identified today as a key issue in restraining growth for London hoteliers this year.
Hotels in the capital saw a record 2014 but so far this year has not replicated this stellar performance, according to new PwC analysis.
While average performance metrics are still very high by most global city standards, the pace of growth in London in the first half of 2015 has been mixed.
PwC expects London to see occupancy growth of just 1% overall this year, taking occupancy to 84%.
Growth in average daily rate is forecast to be 1.8%, taking it £142, partly due to the Rugby World Cup. This drives growth in revenue per available room [RevPAR] of 2.7% to £119.
Looking ahead to 2016, PwC forecasts more growth but at a slower pace. The study expects marginal occupancy growth of 0.3% that will keep occupancy at 84% and a 2.2% growth in ADR which will mean rates of £145.
This combination will drive RevPAR growth of 2.3% to take yields to £122.
Liz Hall, head of hospitality and leisure research at PwC, said: “London occupancies have averaged 80% or above since 2006 and our annual forecast for 84% this year and next would be the highest this decade.
“Growth isn’t being experienced evenly by all market segments. The recent variable performance in London in the first half of 2015 has shown some polarisation in performance with the middle segments hurting the most. Is the increase in budget rooms upsetting the apple cart in London and creating this middle market squeeze?”
Looking around the country, most cities have continued to see very strong RevPAR growth, according to the research. Growth has come from a mix of occupancy and ADR, but particularly from rates.
Exceptions include Aberdeen, which has seen both occupancy and ADR falls drive an 18% RevPAR decline to June.
Many cities continue to see double digit RevPAR growth, including Belfast, Bristol, Birmingham, Coventry, Liverpool, Nottingham, Plymouth and Southampton.
Overall strong trading and low supply mean that PwC expects 1.6% occupancy growth this year, taking occupancy to 76% and ADR growth of 4.6%, taking rates to £67. This mean RevPAR growth will be 6.3%, nudging RevPAR to £51.
Hall said: “Growth is still in the air and there is more to come, but the pace of growth is slowing a bit now in the regions. This is not surprising, we have seen 32 months of occupancy growth.
“UK occupancy levels are at record highs with ADR heading in the right direction in the regions. It’s getting harder, but even slower growth is a good result for hotels.”
PwC forecasts further growth in 2016, but just not at the same pace with a 0.6% gain taking occupancy to 77%. ADR growth is predicted to fall to 3.5%, taking rates too£69. This means RevPAR growth of 4.2%, taking RevPAR to £53.
The Rugby World, which started this month, will provide a fillip for hoteliers across the country.
With a third of matches set to be played on a Sunday - traditionally a low occupancy night - the event is a great opportunity for hotels, although, there are fears the event could put off the corporate market at a traditionally busy time. PwC cautioned.
Meanwhile, the rise of shared accommodation platforms for business and leisure has meant more travellers are aware of the brands and the opportunities of experiencing staying in shared space.
Hall said: “In London, the numbers of Airbnb listings are increasing and this trend is likely to continue and cause localised issues for hotels, around pricing pressure and/or underutilisation, especially for undifferentiated products.
“Such an impact is likely to be felt more strongly by hotels in a downturn.”
David Trunkfield, hospitality and leisure leader at PwC, said: “UK hotels continue to benefit from the improving economic and travel backdrop.
“So far this year, the pace of growth has been variable in London but dynamic in the regions, driving a bumper year in the investment market.
“Hoteliers still face plenty of challenges and geopolitical uncertainty.
“New products and business models can sometimes represent a challenge for existing businesses. Every so often a new trend has the potential to change the established way of doing business and can leave some businesses ill prepared for the new order.”
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