UK hotels anticipate lower growth in 2016

24 October 2015

UK hotels outside London experienced double-digit growth in revenue in 2014, which is expected to increase by a further 6.3 per cent this year and 4.2 per cent in 2016, according to a report.

But the UK hotels forecast 2016 published by PwC added revenue per available room (RevPAR) growth is only anticipated to be 2.7 per cent in the capital in 2015, and rise by a further 2.3 per cent next year. But it added if this growth was achieved, London could still be 6 per cent above pre-recession levels.

The authors said growth in 2016 was expected to be "at a slower pace", and the impact of the National Living Wage for instance – with potentially significant increases to current hotel payroll costs – remained to be seen.

PwC said despite economic issues affecting the Eurozone and countries like Russia, Brazil and China, the first six months of 2015 saw over 16.8 million overseas visits to the UK, a 3 per cent increase over 2014. London occupancies have averaged 80 per cent or above since 2006 and PwC’s forecast for 84 per cent this year and next would be the highest this decade.

The slowdown in the first half of the year affected the mid-market hotels more than the luxury or budget accommodation and around the UK many cities continued to see strong RevPAR growth in the first half of 2015. Belfast, Bristol, Birmingham, Coventry, Liverpool, Nottingham, Plymouth and Southampton all saw double-digit growth.

There has been a continuing shift towards choosing branded hotels and a decline in the mid-market and the independent sector – over 50,000 rooms have closed between 2000 and 2014 alone – as demand for budget products increased. More recently hotels have also been facing increasing competition across London from serviced apartments, new style hostels and shared economy spaces like Airbnb, Homeaway and Flipkey.

Research from Phocuswright showed the incidence of shared space rentals is increasing – with 9 per cent of travellers in the UK renting space in a private home or apartment in the past year. This compared to 11 per cent in France and 13 per cent in Germany.

Airbnb in particular benefited with market researcher BDRC Continental finding its recognition had leapt among business as well as leisure travellers. In London there are around 31,000 listings available. PwC research in September 2014 showed 10 per cent of hoteliers reported experiencing negative demand as a result of Airbnb’s rise. But the report suggested by attracting more visitors, the rental sites could be good for the wider London economy.

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