The PwC Hotels Forecast 2019 doesn’t make for comfortable reading, with growth set to be adversely affected by economic uncertainty, depressed business demand and the sector being flooded with new rooms.
While last year showed strong trading, in 2018 slower economic growth has held things back, while up to five thousand new hotel rooms are potentially being launched in London alone, with another 4,300 set to open in the new year.
Over the last five years, the sector has already been expanded to the tune of approaching 40,000 rooms. Outside London, a similar number is set to launch over the remainder of this year and in 2019.
Occupancy rates are not matching this increased choice with a slight fall of 0.5% to an occupancy rate of 81% expected next year.
Meanwhile prices are poised to rise – ADR or Average Daily Rate is likely to increase by 0.2% in what remains of this year, to £149, and by more (0.8%) to £150 next year. Yet revenue per available hotel room is not set to rise at the same time, with predicted growth of about 0.3% to £122 this year in 2019, as opposed to the far healthier 2017 figure of 4.6%.
PwC says the sector will need to work harder to protect profitability in 2019, following a string of years which saw very strong revenue growth.
A spokeswoman added that, despite the very low pound, a buoyant leisure travel market and events such as the International Farnborough Air Show and Royal Wedding this year, 2017 was a hard act for the hotel industry to travel.
At the same time, in absolute terms trading is still historically high and in comparison with the rest of the world in London, and, at least nominally, both revenue per available room and ADR are predicted to set fresh records.
However, further problems for the sector are likely to include the reduced numbers of EU nationals to recruit into a heavily people-dependent industry. Equally, the weak pound has made it harder to retain staff and import goods.
Outside London, where occupancy levels since 2015 have been just over 75%, a decline for 2018 overall of 0.3% is predicted, with no growth at all forecast for the new year.
At the same time, it’s thought that ADR growth will falter and slow to 1.3% in 2018, compared with 3.1% last year. In 2019, that slowdown is expected to be more marked, and to drop to 1,3% to £73. Meanwhile revenue per available room (revpar) is likely to rise just 1% then a further 1.2% in 2018 and 2018 respectively, taking it to £55 next year.
While nominally regional hotel revpar is set to be 23% by the end of 2019, in real terms it is lagging by 7%. The key drivers of demand include domestic holidays and events, plus inbound travel.
Another forecast is that the overall value of hotel deals with amount to around £6.8bn by the end of this year, up 40% from 2017, the second highest volume of UK hotel investment since a record of £9.3bn was set three years ago.
However, deal activity overall is forecast to drop by over a third (34%) next year.