Hotel industry faces ‘most volatile outlook’ for fifty years

Hotel trading performance across the UK is set to decline “significantly” in 2021 due to the impact of the ongoing pandemic, according to new research from PwC. 

Hotel occupancy rates next year are now forecast to be 55% across the UK, and could take four years to return to pre pandemic levels. The firm marked its latest findings as the “bleakest outlook” for the industry since benchmarking began in the 1970’s. 

It comes as PwC published its latest UK Hotels Forecast 2020-2021, an analysis into market conditions for hotels over the next 12 months. 

Despite some relief against the “precipitous” decline of 2020, the forecast for occupancy rates in 2021 is 52.4% for London and 59.2% for the regions, assuming there will be a vaccine by next summer. 

The respective figures mark a steep decline against the 2019 occupancy rates of 83.4% and 75.4% respectively.

Overall revenue per available room in London is also forecasted to fall significantly in 2020 to £28.72, £100 less than in 2019.

PwC attributed a “particularly bleak” forecast for the capital to a slow recovery in corporate international travel and weak demand for business trips, meetings and events.

With a vaccine, RevPAR is expected to recover to £64.81 in 2021, but PwC noted that in the long-term it is “unlikely that occupancy, ADR (average daily rate) and RevPAR (revenue per available room) will return to 2019 levels until at least 2023”. 

UK regions are expected to perform better than London in 2021, whether a vaccine is developed or not. 

PwC added that a stronger staycation market will “remain a fixture, whilst unpredictable overseas travel, ongoing restrictions and local lockdowns, will further fuel demand for domestic leisure tourism”. 

Sam Ward, UK hotels leader at PwC, said: “As the UK travel and tourism sector bears a considerable brunt of the impact of COVID-19 this is far from business as usual. No previous event has had such a deep and long-lasting negative impact on hotels and there is no quick fix. 

“The silver lining is that UK regions should benefit from increased staycation demand in 2021 and coast and country properties offer potential. Meanwhile the fall in corporate demand, coupled with the complete lack of sports and music events will see big city hotels suffer disproportionately.”

 He added: “Amid so much uncertainty, it’s imperative that hotels ready themselves for a difficult winter and act swiftly to demonstrate their adaptability. This is the time for hoteliers to look at their business model and find ways to cut costs. 

“Those who can shift their focus to new customers, reorganise their operations and find innovative solutions stand the best chance of weathering the storm.”