London hotels ADR down 1% in July, CoStar finds

London hotels have experienced softer trading this year, with pricing being a challenge across the market as average rates are down around 1% year to July, according to new data from CoStar. 

It stated that hotels in London struggled to drive prices in 2024, as average daily rates rose in only two submarkets.  

Clear outperformers include hotels in The City and the Knightsbridge/Pimlico/Victoria submarkets, which have been the only ones to experience uplifts in pricing at approximately 2% each. 

Hotels in the latter have also achieved the highest revenue per available room (up to £400) year-to-July across London, with occupancy also growing, highlighting the appeal of hotels in this area. 

According to the report, new luxury openings, including the most recent addition, the all-suite 61-room The Emory, may have helped lift prices locally. 

Hotels in The City have benefited from robust midweek demand, supporting stronger pricing growth, despite weaker weekend leisure business and some additional supply in recent months.

Underperformers include submarkets with a higher share of economy rooms, such as London Surrounding East and London Surrounding South, both experiencing an average rate decline of approximately 11% and 5%, respectively. 

Hotels in the eastern part of the city have been the worst hit since occupancy also dropped nearly 10% year to July, resulting in a 19% RevPAR loss.

While hotels in the London Surrounding South may benefit from events such as Wimbledon and their connectivity to London Gatwick Airport, those in the London Surrounding East have a more limited set of demand generators. 

CoStar stated that hotels in this area tend to be “good alternatives” for central London properties, with connectivity via the road and public transport network, also somewhat competing with growing supply in the Hackney and Stratford submarket. 

The area is also dominated by brands such as Premier Inn and Travelodge who have reported softer trading in London this year, likely impacted by consumers’ price sensitivity. 

Despite decreasing by nearly 11% year over year, hotel prices in the area are still 37% higher than the same period in 2019, further underlining how much rates have grown in the economy and midscale classes in London.

Although achieving the highest ADR across London at approximately £392, hotels in Marylebone and Mayfair have experienced a 4% decline in average rates compared to last year. 

However, hoteliers in the area have offset ADR losses with substantial occupancy gains, leading to a 4% RevPAR uplift. 

Additionally, luxury properties in the area may have been slightly negatively impacted by new supply, while upper upscale hotels seem to have shifted towards an occupancy-driven strategy, particularly for transient business which has been most negatively impacted in pricing terms.

Overall, although at the market level occupancy gains have offset average rate losses, RevPAR is down across 12 of London’s 17 submarkets. However, the report highlighted that despite this slight reset in ADR, prices are still 30% ahead of 2019 levels, while occupancies are gradually returning to their pre-pandemic levels, currently just below 80%, further highlighting the market’s overall strength and resilience, while the long-term outlook remains positive.