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The UK hotel trading performance is set to improve in 2022 as demand continues to return, revealed research from PwC Hotels Forecast.
The forecast for occupancy rates by the end of 2022 is between 70% and 90% of pre-pandemic levels in London, and the forecast in the regions is even higher at between 87% and 96% of pre-pandemic levels.
According to the research, the average daily rate (ADR) will recover to £112.26 in 2022, an increase of £27.78 since 2021. This drives an overall revenue per available room (RevPAR) of £63.69 in 2022.
Additionally, high occupancy rates will help regional hoteliers raise their ADR and a moderate recovery could see it reach £67.05 in 2022, up from £61.59 in 2021. RevPAR could also reportedly increase to £42.36 in the regions.
The prediction forms part of PwC’s UK Hotels Forecast 2021-2022 analysis into market conditions for hotels over the next 12 months.
However, the forecast revealed that a difficult start to 2022 is widely expected, with the end of the majority of government financial support and rent and tax bills due. Managing cash flow and operations will be “critical” to ensure success for hotels across the UK.
According to the research, the speed of recovery will be a major issue in 2022, but this will be driven by factors outside of the sectors’ control, such as the pace and size of the return of tourism, international and domestic business and events.
For staycation demand, summer 2022 may again see difficult trading conditions if international travel is back on the agenda for the domestic market. The latest PwC research shows that only 37% of people still plan to holiday within the UK in 2022.
Overall, the research predicts staycation demand to be similar to the summer of 2021 but instead it will be more evenly spread throughout the year.
Sam Ward, UK hotels leader at PwC, said: “The speed of recovery in the capital is likely to be dependent on international tourism and the speed at which business travel returns as markets lift their own restrictions on citizens travelling to the UK.
“Hotels must continue to innovate and adapt to the markets available to them. Many businesses have publicly stated their ambitions to cut business travel even as restrictions are lifted.”
He added: “In what could be described as a perfect storm, a raft of operational cost increases coincide with the increase in the rate of VAT next April. The ability for hoteliers to endure these costs and preserve profitability, will present a challenge in markets where demand is weaker and more hotel rooms are available.
“Recovery will not be easy or straightforward, but with the right planning and strategy, hotels across the UK can look forward to significantly better trading over the next 12 months.”
