UK hotels ‘to have two more good years’

UK hotels are expected to see strong demand and achieve good rates for two years, according to the latest expert forecast.

The UK’s strong economic performance, robust business travel demand, minimal discounting of room rates and booming real estate prices will result in further room rate increases this year and in 2008.

Room rates in luxury London hotels will approach £360 a night by 2008, according to PricewaterhouseCoopers LLP ‘Hospitality Directions Europe – UK Hotel forecast’.

But the company’s UK hospitality and leisure sector leader Robert Milburn said that while developers and investors are taking advantage of the strong market to introduce new brands and deliver new products such as extended stay hotels, there could be a future downturn.

“There is a risk that many of these new introductions may hit the market just when the cycle slows and increases in competition and supply in some cities may, in due course, exacerbate a trading slowdown,” he warned.

In the meantime, PwC predicts that revenue per available room (RevPAR) for luxury hotels in London is to grow by 10.6 per cent this year.

Overall for the UK RevPAR is forecast to grow by 5.5 per cent this year and 5.6 per cent in 2008 taking UK RevPAR levels to £64.16 in 2007 and £67.77 in 2008.   This growth is largely driven by room rate gains of 4.2 per cent in 2007 and 4.4 per cent in 2008 taking room rates to £73.28. Occupancies are likely to remain around a healthy 72 per cent.

The company’s Liz Hall, head of hospitality research and editor of ‘Hospitality Directions Europe,’ said: “The good times will continue through to 2008, but at a slower pace despite a great start to 2007. And with 83.5 per cent hotel occupancy in London, the capital is nearly full.”

She added: “There is a lot of uncertainty across the world and external industry events can impact heavily as we have seen in the past.

“The going will not necessarily be easy. Competition between destinations and hotels is going to get tougher – hotels need to ensure their pricing and service offerings are inline.”

PwC said that despite consumer spending concerns, travel and holidays remain an essential lifestyle component for many people and travel demand continues to grow – globally and to the UK.

The domestic travel outlook may benefit from calls to holiday at home and a recent report suggests three per cent of people in the UK have given up air travel.

by Phil Davies