UK Hotels forecast - September 2010

In this edition of our UK Hotels forecast we predict London's scorching recovery will continue and we expect occupancy records to be broken throughout 2011.

And in the provinces, the pace of recovery picks up as occupancy rates finally improve, but room rate growth continues to be sluggish.

In this issue:

Public sector spending cuts will hurt
Hoteliers we’ve spoken to agree that the spending cuts announced recently are ultimately likely to damage hotel revenue. Public sector-generated travel represents between 20% and 30% of UK hotel business, meaning reduced travel and tougher rate negotiations.

Business travellers are back
Corporate customers want to keep costs down but results from some major hotel groups, like Starwood, IHG and Marriott, show the return of higher-spending corporate travellers. This trend could reduce the proportion of rooms that hotels sell through discounted channels and have a positive effect on average room rates.

Meetings and conference recovery is underway
Conference venues experienced increased uptake in 2010 but this hasn’t been the case across the board. Operators reported an upturn in training courses, with London being particularly strong. Day events held up better than residential events, but there was less spending on catering and bars. Looking 12 months ahead, half of operators are still optimistic but just under a quarter are pessimistic.

London’s supply pipeline to grow in 2011 and 2012
As the start of the Olympic Games gets closer, both planned and under-construction room supply is growing faster than average. London’s generally considered to lack hotels but sometimes supply and demand get out of sync. It remains to be seen if this will happen next year or beyond, or to what extent pent up demand can absorb the newly planned supply.

Provincial recovery to pick up in 2011
We expect outlook for the provinces to improve slightly next year, with average room rates growing 2.5%. But occupancy growth will slow down; by how much will depend on local and regional economies and domestic business travel.