London to maintain highest occupancy in Europe, says PwC

London is predicted to maintain the highest hotel occupancy rates in Europe during 2016, according to a new report from PwC.

London is forecast to achieve an occupancy rate of 82.9% in 2016, one of three cities forecast to be above 80% with Dublin (82.3%) and Edinburgh (81.8%) following closely behind.

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In 2017, Edinburgh is set to overtake Dublin with  the top three cities predicted to be London (83.5%), Edinburgh (82.5%) and Dublin (82.4%).

Revenue per available room (RevPAR) in the capital is expected to increase by 1.9% in 2016 and 2.2% in 2017, lifting the RevPAR to £120 and £122, respectively. Average daily rate (ADR) is predicted to rise 1% in 2016 to £144 and 1.5% to £147 in 2017.

However, the report said above average supply growth continues and could potentially inflict challenges for existing hoteliers.

It said this year will see 16,000 rooms added to UK hotel supply – up from 10,000 in 2015. Of these, 7,000 will open in London, more than double the figure added in 2015.

Liz Hall, head of hospitality and leisure research at PwC, said: “The high level of new supply could cause a headache for hoteliers in the capital. London seems to soak up new supply but competition is very much a local issue.

“The budget boom continues with around 3,000 new rooms in the budget category (on top of the 3,700 new budget rooms which opened in 2014 and 2015) and budget rooms comprise about 20% of all rooms in London and 33% of the rooms in the active pipeline. That’s a lot of budget rooms to fill.”

Meanwhile, the report, which looks at 19 of Europe’s leading cities, said its latest forecast for the UK regions is “strong”, albeit weaker than 2014.

It predicted – given the already high occupancy levels in 2015 (76%) – hoteliers will be able to raise ADR by 3% in 2016 to £69 and 1.4% in 2017 to £70. It said this will help drive RevPAR gains of 4.2% and 3.2% R in 2016 and 2017.

Occupancy is forecast to increase by almost 1.2% to 77% in 2016, and edging up to 78% in 2017, while growth in new supply could reach 2% this year as over 9,000 rooms are expected to open. A supply growth of 1.7% is expected in 2017.

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