London is experiencing its highest hotel occupancy levels for a decade but a weak Euro is putting constraints on growth, according to analysis by PWC.
London hoteliers saw a record 2014 but so far 2015 hasn’t replicated this “stellar performance” with the pace of growth in the capital in the first half of 2015 “mixed”, the research showed.
PWC’s UK hotels 2016forecast found that demand in London is still strong but “the falling Euro is a key issue”.
Overall for 2015, PWC expects London to see occupancy growth of 1 per cent taking occupancy to 84 per cent. ADR growth is forecast to be 1.8 per cent taking ADR to £142. It found the increase in occupancy and ADR is partly due to the Rugby World Cup in the second half of 2015. This drives RevPAR growth of 2.7 per cent taking RevPAR to £119.
“London occupancies have averaged 80 per cent or above since 2006 and our annual forecast for 84 per cent this year and next would be the highest this decade,” said PWC head of hospitality and leisure research, Liz Hall.
She added: “Growth isn’t being experienced evenly by all market segments. The recent variable performance in London in the first half of 2015 has shown some polarisation in performance with the middle segments hurting the most. Is the increase in budget rooms upsetting the apple cart in London and creating this middle market squeeze?”
Elsewhere in the UK Aberdeen’s occupancy levels have been hit by the fall in oil prices. Occupancy levels fell by 12.9 per cent, with RevPar dropping by 21.4 per cent.
PWC forecasts further growth in 2016, but just not at the same pace with a 0.6 per cent gain taking occupancy to 77 per cent. ADR growth is predicted to fall to 3.5%, taking rates to £69. This means RevPAR growth of 4.2 per cent, taking RevPAR to £53.
The research showed that the rise of shared accommodation platforms for business and leisure has meant more travellers are aware of the brands and the opportunities of experiencing staying in shared space.
Hall said: “In London, the numbers of Airbnb listings are increasing and this trend is likely to continue and cause localised issues for hotels, around pricing pressure and/or underutilisation, especially for undifferentiated products. Such an impact is likely to be felt more strongly by hotels in a downturn.”