London hotel prices are likely to drop this year after the record highs seen during the Olympics year of 2012.

A report by Pricewaterhouse Coopers into the hotel sector in 19 major European cities predicts that London’s average daily rates (ADR) will fall by an estimated 2.7 per cent to £139.07 per room in 2013 from last year’s £142.95.

But this will still be 4.5 per cent higher than the hotel rates in the UK capital during 2011 when ADR was £133.08 per room.

PWC is also predicting that occupancy rates will fall at London’s hotels from 80.2 per cent last year to 77.1 per cent in 2013, due to the opening of new hotels adding to the overall bedstock.

“London has seen above average levels of new hotel supply added in recent years and there is worry of a post Olympic supply overhang with another 5,000 rooms opening in 2013 – including the Shangri La, London Edition, Beaumont and many branded budgets. This follows around 8,000 new rooms in 2012,” said the report.

Despite the forecast fall in hotel rates, London is still likely to be the fourth most expensive of the 19 European cities this year with only Paris, Geneva and Zurich having higher ADRs.

Meanwhile Edinburgh is expected to see a 3.7 per cent increase in its average rates from £77.42 last year to £80.26 in 2013, while Dublin rates are forecast to rise by 1.9 per cent to €90.44 per room.

PWC is predicting that that the Russian cities of Moscow and St Petersburg will see the highest rise in hotel rates this year (by 5.2 and 5.1 per cent respectively) followed by Paris and Frankfurt. Madrid is expected to see the biggest fall in rates by around 5.6 per cent to €80.27.

Robert Milburn, hospitality & leisure leader at PWC, said: “Our 2013 forecast depends largely on how the eurozone crisis evolves. While currently we expect steady growth in many cities, if the crisis escalates, we may see even less promising results for the hotel industry.”

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