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PwC: Hotels face uncertainty in 2019

Person opening a hotel room door

Hotels across the UK face the prospect of stalling growth in 2019 due to economic uncertainty, weak business travel demand and an influx of new supply, according to PricewaterhouseCoopers (PwC).

The firm’s Hotels Forecast 2019 shows the outlook for London has levelled out, with year-on-year occupancy growth of just 0.1 per cent and a 0.5 per cent fall predicted for 2019.

PwC also forecasts moderate growth in average daily rate (ADR) of 0.8 per cent in 2019, taking it up £1 to £150. Meanwhile, revenue per available room (revpar) will remain static, with 0.3 per cent predicted for both 2018 and 2019 – a big fall compared to the 4.6 per cent growth seen in 2017.

Data from STR shows London could see 5,000 new rooms made available by the end of 2018 and a further 4,300 in 2019. This is in addition to the 38,000 rooms added over the last five years.

The regions will see similar stagnation, with occupancy expected to remain at the average 76 per cent seen every year since 2015 and ADR predicted to increase by just 1.3 per cent in 2018 and 1.2 per cent in 2019. This forecast comes despite the addition of 40,000 rooms across 2018 and 2019.

Liz Hall, head of hospitality and leisure research at PwC, said: “2017 was a hard act to follow for hotel trading, in terms of growth, and 2018 has been held back by uncertainty, slower economic growth, significant supply additions and reported stuttering business travel.

“However, trading in real terms remains extremely high by historic and global standards for London and by 2019 we forecast both ADR and revpar to reach new records in nominal terms.

“For a sector heavily reliant on people to deliver its products and services, the shortfall in availability of EU nationals remains a concern for hotels and the weak pound has pushed up the costs of retaining staff and importing goods within the sector.

“Following a number of years of strong revenue growth when there was not the imperative focus on costs, prudent operators and owners need to adopt a stringent approach to operating costs growth in 2019 to preserve profitability.”

pwc.co.uk

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