Uncertainty in the financial markets may hit hotel sector

The UK hotel sector is continuing to perform well but “storm clouds may well be gathering”, experts have warned.

The latest UK Hotel Forecast, from consultancy PricewaterhouseCoopers, predicted that revenue per available room (revpar) will grow by 6.2 % in both 2007 and 2008 while in London revpar should grow 10.6% in 2007 and 9.2% in 2008.

Occupancy levels in the UK will remain flat at about 75% over this period, but the sector is benefiting from a strong economy and in the luxury hotel market average room rates could hit £360 in the capital next year. 

However, the continuing uncertainty in the financial markets and the over-reliance on London could spell problems for the sector, according to Robert Milburn, UK hospitality and leisure sector leader at PwC.

“We should see another two years of good performance for the UK hotel sector but it will be highly dependant on London’s performance and as we know, the storm clouds may well be gathering on the back of the credit crunch currently occupying the headlines,” he said.

Liz Hall, head of hospitality research at PwC and editor of the report, added: “Room rates have increased for the past three years in the provinces and for the past six years in London, which is helping make the capital one of the most profitable hotel markets in the world.

“This has been a story of growth-on-growth but it does now look like levelling off. If events in the markets mean the corporate world stops travelling, the industry could start to feel the impact.”

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By Daniel Thomas

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