Weaker 2013 predicted for London hotel market but Edinburgh bounce back expected

By Peter Ruddick

- Last updated on GMT

Related tags: Hotel

An Olympics hangover and depressed occupancy levels and room rates due to a surge in new supply are expected to impact the London hotel market in 2013
An Olympics hangover and depressed occupancy levels and room rates due to a surge in new supply are expected to impact the London hotel market in 2013
Hotels in London are expected to face a weaker trading market this year with an Olympics hangover combined with depressed occupancy levels and room rates coming together to temporarily hold back the city's hoteliers.

The prediction is a key headline in PwC’s latest European hotel forecast which reports that while Paris will lead the way, none of the main cities in the continent are expected to post double digit growth in revenue per available room (RevPAR).

Occupancy in venues in the UK capital is expected to dip under 80 per cent in 2013 while RevPAR is predicted to average out at £107.26 for the year - down from the forecasted figure of £115.08 in 2012. 

However the news is better north of the border - the market in Edinburgh, which suffered a tough 2012 despite Scotland outperforming the UK at certain times of the year,​ is expected to bounce back in 2013.

Positive growth in occupancy (77.2 per cent), average daily room rate (£80.26) and RevPAR (£61.99) are all predicted for Edinburgh hotels by the hospitality & leisure team at PwC. Edinburgh is expected to be the second fullest of the 19 cities PwC's research investigated - Paris is expected to have the highest occupancy with London taking the third place in the table.

New normal

"A return to a steady state of economic growth is not likely in the short term and the hotel industry has to adapt to this ‘new normal’ as well as to new trends and challenges facing the sector," said Robert Milburn, hospitality & leisure leader at PwC.

Milburn explained success in 2013 would be dependent on the wider economy and hotel innovation.

"Our 2013 forecast depends largely on how the Eurozone crisis evolves. Whilst currently we expect steady growth in many cities, if the crisis escalates, we may see even less promising results for the hotel industry.

"2013 may be largely about the economy but it will also be about seizing the opportunities created by past investment, a clear strategy and skilful management," he added. 

London:

  • 2013 Forecasts: Occupancy down 3.9 per cent at 77.1 per cent, average daily room rate down 2.7 per cent at £139.07, RevPAR down 6.8 per cent at £107.26.
  • Influences: Olympics hangover, 5,000 rooms opening in 2013 pushing down occupancy levels and room rates, increased business and tour operator bookings, improving economy.
  • Rationale: "While we do expect a weaker hotel market in 2013, as the inevitable Olympic hangover kicks in and the surge in new supply during 2012 and 2013 bring down occupancy and rates, we don’t expect these temporary factors to hold London back for long."

Edinburgh:

  • 2013 Forecasts: Occupancy up 0.3 per cent at 77.2 per cent, average daily room rate up 3.7 per cent at £80.26, RevPAR up 4 per cent at £61.99.
  • Influences: Outperforming UK in international visitors, operators keen to open in the city, boost from events such as The Open and Edinburgh Festival, prosperous local economy.
  • Rationale: "We see some bounce back in 2013 – through rates rather than occupancy. The forecasted average daily room rate (ADR) is predicted to be above the long term average. The one off impact of the London Olympics will not be repeated in 2013 and this is a major positive for Edinburgh. Occupancy and ADR gains will lift RevPAR to almost £62."

Liz Hall, head of hospitality and leisure research at PwC, had this advice for hoteliers looking to make sure they meet, or do better than, the predictions the firm has made:
"Hoteliers face a host of issues and challenges this year – not just the economic downturn but advances in how their customers use technology and social media to evaluate and make purchases. Customer engagement will be crucial – with fewer customers to go around in 2013, loyalty and reward programmes could make the difference between success and failure,” she said.

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