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PwC forecasts weaker growth for next two years

Hotel occupancy in the regions is forecast to see marginal growth in 2018 and even less in 2019, taking occupancy levels to 77%

The latest figures from PwC’s UK hotels forecast show a more modest outlook for 2018 and 2019, thanks to the impact of Brexit uncertainty and the effect of a weak pound wearing off.

The outlook for London remains positive but growth is expected at a much slower pace, PwC forecasts occupancy growth of 0.4% this year and 0.3% next year as weak demand continues and increased room supply weighs down growth.

Average Daily Rate growth will also be tempered with a 0.2% gain in 2018, some way off the 4.3% seen last year. This will take the average daily room rate (ADR)  to £149, still a record in nominal terms with more robust growth of 1.6% expected in 2019 taking ADR up to £151.

Revenue per available room (RevPAR) is forecast to see only 0.6% growth this year compared to 4.6% last year taking RevPAR to £122. In 2019, a 1.9% gain is predicted taking RevPAR to £124.

Commenting on the latest forecast, Liz Hall, head of hospitality and leisure research at PwC, said: “The boost to inbound holidays from the weak pound has started to fizzle out and ongoing uncertainty around Brexit and the fragile economy is a recipe for some tough year-on-year comparisons for the next few months.”

Hotel occupancy in the regions is forecast to see marginal growth of 0.6% in 2018 and 0.5% in 2019, taking occupancy levels to 77%.

ADR is to increase 0.6% climbing to 1.2% in 2019 taking nominal ADR to £72. RevPAR is forecast to see 1.1% growth, with an additional 1.4% gain in 2019 lifting RevPAR to £56.

Hall added: “We expect hotel trading in many regional cities to remain relatively buoyant, driven by a variety of factors such as business travel and short leisure breaks. However, international destination cities could also feel the impact of the weak pound effect diminishing and of increasing new supply additions.”

PwC also anticipates a strong pipeline of portfolio deals with hotel owners considering whether the number of exits in the second half of 2017 is an indication that the end of the current cycle could be in sight. As such deal volume is predicted to reach £6bn, up 22% from 2017 with a fall in deal volume to £4.5b in 2019.

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