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Hotels forecast

PwC’s 2013 UK hotel forecast update

Theodore Koumelis - 01 March 2013, 11:00

While occupancy is expected to fall by only 0.7% to average around 72%, ADR could fall by 1.2% to just under £82. Averages conceal London’s star qualities and a more lacklustre performance across diverse regional locations. 

PwC’s latest 2013 UK hotel forecast is now underpinned by weaker GDP growth and forecasts an overall 2% decline in UK RevPAR, taking RevPAR to just under £60. While occupancy is expected to fall by only 0.7% to average around 72%, ADR could fall by 1.2% to just under £82. Averages conceal London’s star qualities and a more lacklustre performance across diverse regional locations.  

Robert Milburn, hospitality & leisure leader at PwC, said: “This updated UK hotel forecast reflects our latest thinking on hotel performance in 2013, with the forecast impacted by weaker UK economic prospects but also supported by a weaker pound. While we still anticipate overall trading declines in 2013, these falls are less sharp for London but more unfavourable for the regions than we expected in November 2012.”

London - new supply is expected to shave two percentage points off occupancy in 2013
We anticipate ADR will decline by 1.2% in 2013 but with rates averaging almost £137, this remains high by any city standard. Occupancy is expected to fall by two percentage points to 79%, making a third year of decline. This partly reflects the steep 6.5% (7,700 rooms) increase in hotel rooms in the capital in 2012 with a further 4,600 rooms set to open this year.

Liz Hall, head of hospitality and leisure research at PwC, said: “For travellers, a more affordable London is good news and will help the city capitalise on the positive media spotlight that shone in 2012.  For hoteliers, RevPAR is expected to end the year at £108, 3.2% below 2012 levels but still 18% higher than 2009.

“The year hasn’t kicked off well and STR Global data for January shows a particularly weak performance in London.”

Regions - weaker economic prospects make the going tougher
Regional UK hotels saw quite a strong finish to 2012, which boosted overall annual ADR growth of almost 1%. Despite hopes that the regions as a whole might have turned a corner on rates in 2012, PwC can’t see this pace of growth continuing into 2013, mainly because outside London demand is tied more closely to UK economic growth, and weaker UK GDP growth expectations are likely to dampen performance.

Liz Hall, head of hospitality and leisure research at PwC, said: “2012’s robust finish means we are starting our forecast from a stronger Q4 2012. So while the percentage declines are higher than previously predicted, the absolute numbers for 2013 are actually a little stronger than in our last forecast. We now anticipate only a marginal occupancy decline in the regions, leaving occupancy at a fairly healthy 70%, the same as in 2012. However, an expected 1.2% decline in ADR takes average rates to just over £58. This will drag RevPAR down by 1.4%, to £40.57 –virtually the same level as in 2010.”

UK Hotels 2013 forecast: how trading could change in  2013
     
 
London
Regions
UK
 
2012
2013
2012
2013
2012
2013
Occupancy%
81%
79%
70%
70%
73%
72%
ADR (£)
138.28
136.62
58.89
58.21
82.75
81.77
RevPAR (£)
111.34
107.75
41.13
40.57
60.31
59.11
 
 
 
 
 
 
 
% growth on previous year
 
 
 
 
 
 
Occupancy
-1.9%
-2%
-1.5%
-0.2%
-1.6%
-0.7%
ADR
4.1%
-1.2%
0.9%
-1.2%
2.5%
-1.2%
RevPAR
2.2%
-3.2%
-0.5%
-1.4%
1.0%
-2.0%
Econometric Forecasts: PwC February 2013
Benchmarking Data: STR Global February 2013  

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