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London hotel rates could 'plateau' in 2016

By Michelle Perrett , 16-Feb-2016

London hotel rates could 'plateau' in 2016

London will see additional pressure put on occupancy levels and achieved room rates during 2016 as 7,000 rooms are set to open.  

The news comes from the latest Hotel Bulletin for Q4 which is published by HVS in conjunction with AlixPartners and AM:PM.

The report also revealed that across the UK 16,000 rooms are expected to open this year compared with only 10,000 last year.

RevPAR growth across 12 UK cities in the last quarter of 2015 was an average of 2 per cent, significantly lower than the 19% recorded in Q4 2014. Occupancy in the same period fell in eight of the 12 cities while London’s declined for the fourth consecutive quarter.

"The huge amount of openings planned for 2016 in London will be of concern to the city’s hoteliers who, while historically are used to robust performance, are currently experiencing limited demand growth," said HVS chairman Russell Kett.

“Flat or declining occupancy is historically followed by plateauing rates indicating that a peak in hotel market trading may nearly have been reached."

The Bulletin said that over half of the UK’s development pipeline, which will open within the next three years, is in the budget sector with hostels and two star hotels (51 per cent). The is followed by four-star properties (28 per cent); apartments (9 per cent) while a further 9 per cent are five-star hotels.

“Demand for budget rooms is still strong from both the leisure and the business sector proving the format is one of the most successful in the hotel business,” said Kett. “This growth is likely to continue, particularly with new players emerging such as Premier Inn’s super budget hub concept.”

Notable hotel openings in Q4 2015 included four new hotels under various Hilton brands, totalling 654 bedrooms. Travelodge grew its presence in London to more than 8,000 bedrooms following openings in Hackney and Richmond, while IHG opened the doors at its five-star, 453-bedroom InterContinental London – the O2.