p15 pink nov28 26/11/08 20:37 Page 15
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city & finance news
London hotels face 12% slump
Domestic holidays have been tipped
to fare well during the recession,
but the latest forecast for UK hotels,
especially in the capital, is not so
rosy. Tricia Holly-Davis reports
THE CAPITAL’S hotels are facing a 12% slump in
occupancy rates and revenues next year as
turmoil in the financial markets and negative
consumer and corporate sentiment continue.
The latest analysis from Pricewaterhouse-
Coopers predicts a bleak outlook for the UK
hotel industry. It predicts that “domestic and key
overseas travel markets for corporate, group and
transient leisure travel will be impacted hard”.
And its UK Hotels Forecast also anticipates UK
occupancy rates will decline by 2.3 percentage
points, while revenue per available room (revpar)
will drop by 0.1% for the remainder of this year.
The 2009 forecast expects a further deterio-
ration in the sector’s fortunes. The UK as a whole
will see a 4.3% revpar decline, as room rates fall
for the first time since 2003.
In London, occupancy rates are expected to
fall by 11.8%, as corporate travellers in particu-
lar trim their budgets. By the end of 2009, occu-
pancy levels could be 10 percentage points lower
than in 2007 and revpar could fall by nearly 12%,
from a heady £94.28 in 2008 to £82.92 in 2009.
London has not seen a decline on this scale
since 2001 and before that as far back as 1991.
If economic conditions worsen, PwC forecasts
that UK hotels could see revpar fall by as much as
9.4% next year, as room rates fall by 7.7%. Hotels in London will bear the brunt of the recession, with occupancy rates set to fall 12%, says PwC
London could face occupancy falls of 8.7% and
average room rate declines of 15.9%. This would Of the 281 leisure industry businesses that
Capital punishment
see revpar plummeting by 23.3%. failed in the third quarter of this year, 18 were
How London’s hotel business is predicted to plummet in 2009
Although average daily room rates rose 3.6% hotels, up from 10 in the same period last year.
in the first three quarters of 2008, with London “As the downturn tightens its grip, it is easy
4
2008 2009 up by 6%, this was due to strong first half-year to believe what we have seen so far is just the
3.4%
2
trading prior to the credit crunch and favourable tip of the iceberg for hotels,” said Stephen
corporate rate negotiations agreed in 2007. Broom, hospitality and leisure director at PwC.
0
-0.1%
Looking ahead, the report warned “aggressive “Although hotel insolvencies have risen by over
-2
-1.9%
rate rises of the past are over and the new 150% there will be more failures in 2009 when the
-2.3%
-2.6%
-4 negotiating season sees buyers calling the shots”. full impact of reduced demand is felt,” he said.
%
-4.3%
“This will mean lower increases in contract, The findings are consistent with a report from
-6
corporate and group rates for next year. In real credit rating agency Experian, which also found
-8
terms, the pressure on rates will feel harsher and that hotel failures in the UK were on the rise.
margins will be squeezed further,” it added. Experian reported that insolvencies for the
-10
-11.8% -11.9% The latest forecast follows a separate report leisure and hotel sector rose 13% in the third
-12
by PwC issued earlier this month, which found quarter over last year, totalling 160.
UK London UK London
occupancy occupancy revpar revpar
that the number of hotels going out of business
Source: PwC
had soared by 150% in the past two years. ■ Hotels & resorts news, p24
28.11.2008 15
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