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Editorial Features

Uncertainty likely to stall hotel growth, says PwC

Published: 21 Sep 2018

Hotel trading growth is set to flatten in the year ahead due to economic uncertainty, weak business travel demand, and an influx of new rooms scheduled to open across the country, according to PwC.

The PwC’s Hotels Forecast 2019 analysis found that the outlook for London has levelled out with year-on-year occupancy growth of only 0.1% and a marginal fall of -0.5% forecast for 2019, which will see occupancy levels drop one percentage point to 81% in 2019.

However, according to research from the global hotels data company STR, a potential 5,000 new rooms could open in London in 2018 with a further 4,300 in 2019. This is on top of the 38,000 rooms added in the previous five years.

PwC predicts that Average Daily Rate (ADR) will see a marginal uplift during the next year, with 0.2% growth for 2018 taking ADR up £1 to £149 and 0.8% for 2019, taking the average rate up another £1 to £150. 

Liz Hall, head of hospitality and leisure research at PwC, said: “2017 was a hard act to follow for hotel trading, in terms of growth and 2018 has been held back by uncertainty, slower economic growth, significant supply additions and reported stuttering business travel. This is despite the weak pound buoying leisure travel, the Royal Wedding and the International Farnborough Air Show effect. However, trading in absolute terms remains extremely high by historic and global standards for London and by 2019 we forecast both ADR and RevPAR to reach new records in nominal terms.

“For a sector heavily reliant on people to deliver its products and services, the shortfall in availability of EU nationals remains a concern for hotels and the weak pound has pushed up the costs of retaining staff and importing goods within the sector.

“Following a number of years of strong revenue growth when there was not the imperative to focus on costs, prudent operators and owners need to adopt a stringent approach to operating costs growth in 2019 to preserve profitability.”

By Mike Fletcher

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