London’s high occupancy rates will give companies the confidence to raise prices across many hotels in the capital, a study published today has found.
According to PwC’s European hotel forecast, London now has its highest occupancy levels (84.4%) for 20 years with strong RevPAR growth of 4.6%. In 2015 the average daily rate is expected to grow 3 per cent to £144 and increase further to £151 in 2016.
The forecast, which analyses revenue and occupancy hotel forecasts in Europe, said an improving economic and business travel backdrop will drive growth for the hotel sector across Europe this year. It follows significant growth in 2014 with Europe attracting 20 million more international visitors than in 2013.
It found that all cities listed, excluding Geneva, Zurich and Moscow, are expected to achieve higher growth in 2015 and almost all cities should see additional growth in 2016.
“Growth is being driven by a combination of higher average daily rates (ADR) and occupancy levels,” said PwC head of hospitality, Liz Hall.
“In some countries, higher occupancies reflect a structural shift towards more branded budget hotels as well as access to online distribution channels and greater propensity to travel.”
Hall said that in many top performing cities high occupancy levels are giving “hotel the confidence to raise rates”.
In 2015, the top cities by RevPAR growth are Dublin (8.8%), followed by Madrid (5.6%), London (4.6%), Rome (3.8%), Prague (3.7%) and Porto (3.7%).
The forecast showed that hotels in Geneva and Zurich face a “challenging time” this year with the removal of the Swiss Franc cap. It said this will make tourism and hotels “more costly” and Moscow is “impacted by international sanctions hindering its revenue growth prospects”.
Hotel investment outlook
According to the forecast the European deals market in 2014 was very active with an estimated 30 per cent increase in transaction volume year-on-year.
Deal activity will remain strong in 2015 with many countries expecting an increase in deal volume, although deal size may not be as strong as 2014 due to potential limited supply in further high-value pan-European portfolios.
Sam Ward, UK hotels leader at PwC, said: “The future for hotel deals across Europe is bright, as equity rich investors look to invest in the sector and benefit from stronger returns as trading conditions are set to improve.
“We believe that RevPAR growth will continue to drive deal activity in key European cities.”