Austerity cuts will hit regional hotels the hardest

Hoteliers in Liverpool and the North East are likely to suffer the most from planned cuts to Government spending.

That's the warning from PricewaterhouseCoopers, which last week predicted that a 25% slashing of public sector budgets would drag down nationwide growth in revenue per available room (revpar) by 0.4% to 2.7% in 2010 and by 0.8% to 3.9% in 2011.

Despite the expected growth, PricewaterhouseCoopers hotels director Stephen Broome told Caterer: "The impact will be on a location basis. If you take somewhere like Liverpool where 33% of the population is employed in Government and semi-Government organisations and there are a number of large offices full of Government employees, you would expect Liverpool to see a larger than average negative impact."

He warned that the North East would be similarly affected, as hotels in the area benefit from a large amount of Government activity. London was also unlikely to escape unscathed, he added.

However, Broome admitted that it was difficult to provide a clear picture on how individual regions would be affected because the Government has been unable to provide figures on how much its central departments spend on hotel accommodation. Caterer attempted to obtain a figure from the Cabinet Office, but it indicated that it did not hold central records on hotel expenditure.

The predictions came as part of an update to PricewaterhouseCoopers' Hotel Forecast, which showed that London hotels were outperforming the rest of the country by a significant margin. Figures for the first six months of the year saw London hotel occupancy at record levels. The strong performance has allowed hotels to reduce discounting and increase their profitability.

•The number of hotels in England and Wales going into administration in Q2 of 2010 jumped 83% on the same period a year ago to 22, according to figures released this week by the Insolvency Service. The figure is a marked increase on Q1 2010 when just six administrations were recorded - the lowest number since the Q3 of 2008. But the total number of insolvencies in Q2 2010, which also includes receiverships and Company Voluntary Arrangements, remained static at 33 compared with the same period a year ago.

THE YEAR SO FAR IN NUMBERS

• London RevPAR H1 2010: £95 (+9.2% on H1 2009)
• Provinces RevPAR H1 2010: £39 (+1.2% on H1 2009)
• Business visits: +1.2% in Q1 2010 (on Q1 2009)
• Leisure visits: -4% in Q1 2010 (on Q1 2009)
• London luxury annual room rate: H1 2010: £235 (+7% on H1 2009)


Join the debate on Table Talk: Will public spending cuts affect your region?

Global hotel sector shows signs of recovery >>

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By Neil Gerrard

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