Public sector cuts will hurt but not stop the hotel recovery, say experts

Heavy cuts to the UK’s public sector this autumn will slow rather than kill-off the hotel recovery, according to new research.​

In its Hotel Forecast update PricewaterhouseCoopers (PwC) claims public sector cuts will hurt rather than prove fatal to the sector’s improving performance, thanks to a gradual recovery in the business travel market.

Despite this, with government departments facing cuts of 25 per cent this October as part of the coalition’s spending review, PwC estimates 2010 revPAR growth could be pegged back 0.4 per cent to 2.7 per cent.

By next year, the crunch on public sector finances could lead to a 0.8 per cent reduction, although revPAR growth will still be higher than this year’s at 3.9 per cent.

Uncertain future​

Liz Hall, head of hotels research at PwC, said: “Some hotels are seeing more business travellers midweek. Although travel budgets and corporate polices may be loosening a little, they remain comparatively tight.

“Overseas business visits to the UK show a modest upturn but even as the private sector business traveller starts to come back the public sector counterpart surely won’t.

“While it is clear that hotel income will suffer, we wait to see whether these cuts will translate into less travel or tougher bargaining for lower rates.”

London revPAR soars​

PwC’s report suggests London hotels were in a league of their own in the first half of 2010, with high occupancy allowing an end to discounting and pushing revPAR up 10 per cent from £87 in the first half of 2009 to £95 in 2010.

RevPAR has also recovered in the provinces, albeit at a slower rate, with 1.2 per cent growth to almost £39 in the first half of 2010.