Outlook for London
What a difference the last two months of 2016 made to London's hoteliers. Stronger economic growth than previously predicted and the weak pound appears to be finally driving stronger travel demand. Potential downsides are that it is unclear how long the weak pound will last and that terrorism continues to cast a potential shadow over European cities.
Forecast for 2017
For 2017, we now expect London to see RevPAR growth of 3.3% taking RevPar to £120, driven by a 2.4% ADR increase.
Forecast for 2018
We anticipate a further 2.5% revenue per available room/RevPAR advance to £123, supported by a 2% average daily rate/ADR gain, taking ADR to £149 in nominal terms.
Regional Outlook
2016 saw the regions enjoy a fifth consecutive year of ADR growth. The economic growth upgrade for 2017 should help underpin demand. Some destinations with overseas visitor demand will benefit from the weak pound effect as well as economic growth in key inbound markets. Staycations will also drive demand.
Forecast for 2017
Despite a slower start to 2017 outside London, our latest forecast expects further RevPAR growth of 3% taking RevPAR to £54, driven mainly by ADR growth of 2.9%.
Forecast for 2018
In 2018 we anticipate RevPAR growth slowing to 1.7%, supported by a further 1.5% ADR improvement.
Above average room supply growth in London and some UK cities
For 2017 room openings in the capital could mean a 5.8% increase over 2016. This will make it a challenge to fill rooms but with a high proportion of this new room supply being branded budget with a largely domestic customer base, existing non -budget operators should still be able to benefit from the weak pound. The regions are set to see one of their highest supply growth increases since 2008. Regional development hotspots include Edinburgh, Glasgow, Belfast and Manchester.
Deal talk
Following the outcome of the EU referendum vote, there was an immediate impact on deal activity, with H2 2016 down 40% on H1 02016 deal volumes. However there was an encouraging rebound in investor sentiment in Q4 2016 towards both secure prime London assets and more resilient secure leasehold income assets. In the first quarter 2017, there continues to be investor focus on secure leasehold income assets. Taking into account both current deals and improved UK economic forecasts, we forecast deal volume in the UK to be c. £5. billion for 2017, up from £3.7 billion in 2016.
Standing out from the crowd
Find out where London places in the rankings of our new European cities hotel forecast 2017 & 2018, andwhat next for the sharing economy and the hotel industry.
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David Trunkfield
UK Hospitality & Leisure Leader
Tel: +44 (0)20 7804 6397
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