Hotel prices in London could start to “plateau” this year as more rooms are opened in the UK capital.
Research on the state of the UK hotel industry, Hotel Bulletin: Q4 2015, found that another 7,000 hotel rooms are scheduled to open in London this year.
At the same time, occupancy levels have fallen for four consecutive quarters in the city, according to the report compiled by HVS, Alix Partners and AM:PM Hotels.
HVS chairman Russell Kett said that this year’s high number of new rooms in London would put “additional pressure on occupancy levels and achieved room rates”.
UK hotel rates, particularly in London, have been surging in recent years. Data from hotel portal HRS showed that the average price for a one-night stay went up by 26 per cent between 2011 and 2015. But this could be about to change.
“The huge amount of openings planned for 2016 in London will be of concern to the city’s hoteliers who, while historically used to robust performance, are currently experiencing limited demand growth,” added Kett.
“Flat or declining occupancy is historically followed by plateauing rates indicating that a peak in hotel market trading may nearly have been reached.”
The Hotel Bulletin also found that 16,000 hotel rooms are expected to be added across the UK – compared to 10,000 new rooms in 2015.
Revpar (revenue per available room) across 12 UK cities only rose by 2 per cent in the final three months. But this compared to an increase of 19 per cent during the same period in 2014. This drop in the rate of Revenue per available room: A common metric used by the hotel industry to indicate performance. growth has been attributed to falling occupancy in eight of the 12 cities analysed.
The report found that just over half (51 per cent) of UK hotels “in the pipeline” were in the budget sector. Four-star properties make up 28 per cent of planned hotels, while nine per cent are five-star and a further nine per cent are apartments.
“Future openings are heavily biased towards the budget hotel sector as these are relatively quick and cheap to build and offer good returns,” said Kett.
“Demand for budget rooms is still strong from both the leisure and the business sector proving the format is one of the most successful in the hotel business. This growth is likely to continue, particularly with new players emerging such as Premier Inn’s super budget hub concept.”
Budget brand Travelodge has increased its presence in London to more than 8,000 rooms with the opening of new hotels in Hackney and Richmond in the last quarter of 2015.