London is set to see a boost in overseas tourism as a result of the weaker pound following last year’s EU referendum.
The latest European Cities Hotel Forecast from accountancy firm PwC forecast London would make a return to growth in 2017 and 2018 with 3.3% and 2.5% revenue per available room (RevPAR) growth projected respectively in each year – taking RevPAR to £120 in 2017 and £123 in 2018.
PwC expects growth in the first half of 2017 to build on from the strong sector performance at the end of 2016 driven by the fall in the pound and a more resilient than expected UK economic performance in 2016.
Occupancy remains high and is expected to grow 0.9% to 82% in 2017, while average daily rate (ADR) is set to increase 2.4% to £146. Occupancy is expected to increase a further 0.5% in 2018 with ADR set to increase 2% to £149.
However, PwC warned that above the long-term average supply growth as well as security and safety concerns amongst travellers could provide some downward pressure.
Meanwhile, its forecast for the UK regions in 2017 and 2018 shows, despite a slower start outside London in 2017, hoteliers will see RevPAR growth of 3% to £54, driven almost exclusively by an improving ADR to £71 – the highest ever in nominal terms.
Occupancy is projected to remain high at 76%, but growth is muted in both 2017 (0.1%) and 2018 (0.2%). PwC anticipated that RevPAR growth will slow to 1.7% in 2018, supported by a 1.5% ADR improvement taking rates to £72.
This year is expected to see 20,000 rooms added to the UK hotel supply up from 16,000 in 2016. For the UK regions, overall hotel capacity could expand by 12,000 rooms in 2017, meaning a 2.4% net rise – one of the highest growth rates since 2008.
Liz Hall, head of hospitality and leisure research at PwC, said: Liz Hall, “The effects of a weaker pound were finally felt by hospitality businesses towards the end of 2016 with inbound holiday tourism soaring.
“Hotel RevPAR in London increased by 14.3% year-on-year in December which according to STR Global data is the biggest year-on-year RevPAR growth since the 2012 Olympics.”
PwC expects inbound holiday growth to continue in 2017 with staycations from UK residents providing a further boost to hotel performance.