UK hotels have seen the worst of the recession, says report

The UK hotel industry is over the worst with the leisure trade aiding the London market, according to the PricewaterhouseCoopers LLP (PwC) UK hotel forecast.

Its report, UK hotels forecast: Not out of the woods yet, predicts an overall revenue per available room (revpar) fall of 12.1% this year, which will slow to a 2.4% decline in 2010.

And although growth rates are expected to deteriorate further before Christmas, the speed of decline should begin to slow in the new year.

London occupancy is expected to remain high at around 79% for this year and next, with room rate decline predicted to halve next year while occupancy will return to growth after two years.

Liz Hall, head of hotels research, PwC, explained: “Average room rates in London have been rising for five consecutive years. Now a room will cost £10 less than in 2008 and could cost £20 less by the end of next year. This might be good news for visitors but not for hotelier profits as London saw revpar slide by 9% in the first half of this year, compared with the same period in 2008.”

Budget hotels also fared less well than expected as three- and four-star operators retained custom through value-for-money deals.

Robert Milburn, UK hospitality & leisure leader, PricewaterhouseCoopers LLP, said: “While domestic and overseas leisure tourism has been a tonic for UK hotels, the stark absence of corporate travel has left the sector severely weakened. Overseas visits are down 9% and air travel is expected to contract further, making the return of the business and conference markets critical for a full recovery.

“We last saw a room rate fall of this magnitude (8.1% in 2009) in 2002 when rates fell almost 6%. While rate declines will slow at last, economic and travel fundamentals remain weak and despite accelerating cost cutting programmes, the evidence points to more savage trading at the end of the year. Rate declines will ease in 2010 but we foresee no revpar growth in any quarter over the year.”

Signs of hope despite tough start for hoteliers >>

Rising pound sparks fears of downturn in domestic tourism >>

Hotel revpar forecast to plummet by 19% in 2009 >>

By Gemma Sharkey

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