Growth in the hotel industry will continue to grow in 2016 but is slowing when compared to 2014, according to PwC’s UK hotels forecast for 2016.
The report said that London, following a record 2014, has had a variable trading year, with slower than expected first half results in 2015. Despite this, the second half of the year is expected to be perform better partly due to the Rugby World Cup.
Overall for 2015, PwC expects London hotels to see occupancy growth of 1%, taking occupancy to 84%. Average daily rate (ADR) is expected to grow by 1.8% to £142 while revenue per available room (RevPAR) will see growth of 2.7% to £119.
Looking ahead to 2016, the report predicts occupancy in London to grow by 0.3%, ADR to grow by 2.2% to £145, and RevPAR growth of 2.3% taking yields to £122.
Meanwhile, PwC said that the regions have experienced a very good year-to-date, with most cities reporting a strong RevPAR growth. The only exception includes Aberdeen, which has seen both occupancy and ADR falls drive an 18% RevPAR decline during the year to June.
PwC predicts that, due to strong trading and low supply, hotels in the regions will see a 1.6% occupancy growth in 2015, taking occupancy to 76%, ADR growth of 4.6% to £67, and a RevPAR growth of 6.3% taking yield up to £51.
Cities continuing to see double digit RevPAR growth, including Belfast, Bristol, Birmingham, Coventry, Liverpool, Nottingham, Plymouth and Southampton.
PwC forecasts further growth in 2016, but at a slower pace. It forecasts a 0.6% gain taking occupancy to 77%, an ADR fall in growth to 3.5%, taking rates too £69. PwC said that this would result in RevPAR growth of 4.2%, taking it to £53.
The report also said that transaction activity in 2015 “far exceeded” expectations. Deal volume has increased exponentially with 2015 forecasted to reach £10 billion by the end of the year. The report found that up to July 2015 some £6.5bn of transactions took place, already ahead of 2014 volumes, with regional transactions being the most active.
Major portfolio transactions in the year to July 2015 include Jurys Inn (£675m), Kew Green (£400m), Malmaison and Hotel du Vin (£360m), Moran & Bewleys (£320m) and LRG Group B (£225m).
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FROM PwC
The mood in this edition of our forecast is a positive one; but as always there are uncertainties looming on the horizon.
At a glance
- Highest London occupancy for a decade and UK levels at record highs
- Double digit RevPAR growth for a number of regional cities
- Record year for UK deal activity in 2015
- The Rugby World Cup – up or under?
London
London hoteliers saw a record 2014 but so far 2015 hasn’t replicated this stellar performance, according to new PwC analysis. While average performance metrics are still very high by most global city standards, the pace of growth in London in the first half of 2015 has been mixed. Demand is still strong but the falling Euro is a key issue.
Overall for 2015, PwC expects London to see occupancy growth of 1% taking occupancy to 84%. ADR growth is forecast to be 1.8%, taking ADR to £142. The increase in occupancy and ADR is partly due to the Rugby World Cup in the second half of 2015. This drives RevPAR growth of 2.7%, taking RevPAR to £119.
Looking ahead to 2016, we forecast more growth but at a slower pace with marginal occupancy growth of 0.3% that will keep occupancy at 84% and a 2.2% growth in ADR which will mean rates of £145. This combination will drive RevPAR growth of 2.3% to take yields to £122.
Regions
The regions have experienced a very good-year-to-date. Around the country, most cities have continued to see very strong RevPAR growth. Growth has come from a mix of occupancy and ADR, but particularly from rates. Exceptions include Aberdeen, which has seen both occupancy and ADR falls drive an 18% RevPAR decline to June. Many cities continue to see double digit RevPAR growth, including Belfast, Bristol, Birmingham, Coventry, Liverpool, Nottingham, Plymouth and Southampton.
Overall strong trading and low supply mean that for 2015 PwC expects 1.6% occupancy growth, taking occupancy to 76% and ADR growth of 4.6%, taking rates to £67. This mean RevPAR growth will be 6.3%, nudging RevPAR to £51.
We forecasts further growth in 2016, but just not at the same pace with a 0.6% gain taking occupancy to 77%. ADR growth is predicted to fall to 3.5%, taking rates too£69. This means RevPAR growth of 4.2%, taking RevPAR to £53.
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To see the full report, go to: http://www.pwc.co.uk/assets/pdf/uk-hotels-forecast-2016.pdf
