London hotel rates are expected to fall this year as the city copes with the surge in new properties in the wake of last year’s Olympic Games.

Business advisor Pricewaterhouse Coopers said in its latest update on the UK hotel sector that average daily rates (ADR) in the capital were forecast to be £136.62 in 2013 – down by 1.2 per cent on an average of £138.28 last year.

The opening of more new properties during this year would also help to cause a 2 percentage point decline in occupancy rates from 81 per cent in 2012 to 79 per cent this year.

PWC said that London was forecast to see a 4 per cent rise in hotel rooms this year adding another 4,600 rooms to the current stock of 125,540 rooms.

Samantha van Leeuwen, PWC’s head of UK hotels and venues, told the ACTE London Executive Forum that the drop in occupancy could be an advantage to travel buyers.

“When hotels dip below 80 per cent occupancy, they tend to be more willing to negotiate,” she said. “We are also seeing a two-speed economy with the top cities running at a different speed to the rest of the UK.”

PWC is predicting that average rates in the UK outside London will be static at £58.21 in 2013 compared to £58.89 last year. Occupancy is also forecast to be flat at around 70 per cent.

Rates in the UK regions have still not recovered to 2008 levels when the average daily rate was £64.07 (8 per cent higher than 2012’s average rate), whereas London rates have risen over the same period from £119.40 in 2008 to £138.28 last year – an increase of 16 per cent.

PWC said that there would be another 8,500 rooms added to the UK’s supply outside London in 2013. This represents a 2 per cent rise on last year’s roomstock of 442,140.

“There is also a strong pipeline of rooms after this year which will help buyers as with more competition rates become more negotiable,” added van Leeuwen.

She said that London was helped by record demand in the third quarter of 2012 during the period of the Olympics and Paralympics but had struggled in the following months.

“Occupancy and rates peaked from July and September but came down in the last quarter – November was the worst month of the whole year when it is usually a busy month,” said van Leeuwen. “January was a very poor month and February was also not strong.”

She said that the regional UK hotel market was “more closely linked to the economy and public sector” than London and could also suffer from more Britons deciding to holiday abroad after the wet summer in the UK last year.

“It’s not gong to be the strongest of years for the regions,” she added. “It could be even worse if it rains and puts people off from staying in the UK for their holidays.”

 

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