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London revPAR could drop 18% - TRI
UK hotels are facing their biggest challenge in 17 years, according to forecasts by TRI Hospitality Consulting.
The consultants said revPAR (revenue per available room) in London was likely to drop by 10% in 2009.
But in a worst case scenario, with both business and leisure travel falling steeply, revPAR in the capital could plummet by 18%.
The forecast said that revPAR in UK regions would fall by 8% in 2009, with the worst case being a drop of 14%.
TRI said the first figures are based on a projected fall of 1.7% in the UK GDP this year while the "worst case" figures on a fall of 2.6% in the GDP.
The consultants said that according to VisitBritain, the number of visitors to the country decreased by 2.7% in 2008 and was expected to drop by a further 0.7% this year.
TRI added: "Leisure business does not command high room rates, however, and the fact that many upscale London hotels are losing their highest-paying corporate business informs the central forecast of a 10% decline in revPAR.
"If corporate volumes disappear in even greater numbers as a result of a deeper recession and tourism inflows fall further than projected, then London may experience the downside scenario - a revPAR decline of 18% in 2009."
The consultants said that if the recession, as predicted, lasted one year, 2010 would be a year of "very modest recovery."
RevPAR in the region would fall by a further 2% - or 3.5% in a worst case scenario - and in London by 0.5% or 3%.
But Jonathan Langston, TRI's managing director, said UK hotels were now better placed to withstand the recession than they had been in the last one of 1991.
He cited structural reforms to cost bases, greater access to markets because of technology and much higher occupancy levels than in 1991.
He said there was also a "lag" of six months between economic change and its impact on the hotel business.
"It is our prediction that despite the coming heavy falls in revPAR, UK hotels will maintain profit conversion at a higher level than they did in the early 1990s," Mr Langston said.