UK Hotels Forecast 2019-2020

Turn disruption into opportunity

To win, hoteliers need to embrace technology to increase efficiency, reduce processes, manage data and enhance the customer journey.

The hotel industry is at a pivotal point.

Global and UK political and economic uncertainty, high industry cost inflation, and increasing difficulties in recruiting and retaining staff means that hoteliers need to adopt tech-enabled solutions, increasing efficiency, reducing processes, managing data and enhancing the customer journey.

Our UK Hotels Forecast at a glance

Looking ahead to 2020, we remain cautious in our outlook for UK hotels, although industry performance will vary widely by geography, segment and business model.

London hotels performance

In London, we forecast some modest growth next year, buoyed by international tourism. Despite our fears in our update in March 2019, we now expect London will hold onto growth for the rest of the year, quite a feat given a relentless supply of new rooms.

Big sporting events were a positive contributor to London performance. The ICC Cricket World Cup helped uplift occupancy and hoteliers tell us they enjoyed a better than ‘normal’ Wimbledon. Continuing the sports theme, Major League Baseball also came to the London Stadium in June.

Maintaining the growth will get harder in 2020. While we think occupancy growth rates will slip into negative territory, rate gains will still drive a forecast 1% growth in RevPAR. But inflation increases could put London’s forecast of modest ADR gains under strain.

Infographics: 2020 hotel performance - London vs regions

Outside of London

Overall it's been a difficult year so far and 2019's trading performance looks like turning out worse in terms of ADR and RevPAR than we anticipated in 2019. Conditions are changing with weaker business and leisure confidence and continued high new supply additions. Our forecast for 2020 is a -0.6% decline in occupancy growth, a slight gain in ADR but a drop in RevPAR of -0.3%.

While one-off Cricket World Cup-related demand probably helped slow regional declines in the summer, it wasn’t enough to balance an overall decline in the business market and stop a fall in RevPAR for the second consecutive quarter of 2019.

In the regions, we forecast small declines in RevPAR growth in 2019/20. Looking ahead, UEFA Euro 2020 should help Glasgow (and London) hotels and a new Government Tourism Deal is intended to help businesses attract more visitors by becoming more digitalised and ultimately, more profitable.  

“Weaker trading conditions are settling in across the UK, especially in the regions. Softer demand together with cost inflation will impact profit margins and create a nightmare scenario for hoteliers.”

Shane Harris CEO Jupiter Hotels, August 2019

Spotlights: deals outlook, digital disruption, cyber and what the future holds for EU nationals

The effect on hotel investments in our deals outlook

Protracted Brexit uncertainty, ongoing volatility in economic growth and weakened market sentiment have all contributed to nervousness in the market. UK hotel investment volumes have seen a decline of 35% in H1 2019 to c. £2.6 billion, compared to the higher than average levels in H1 2018. In our report we look in more detail at what this all means for future deal activity, and analyse an emerging trend for leases across the sector.

Taming digital disruption through a guest-led approach to transformation

The hotels sector has seen guest expectations around experience evolving, and an increasing digitisation of guest services. As these trends continue to merge, hotels are realising they have gaps in their strategies that present new challenges for which they are not adequately prepared. We look at how, by understanding the needs and desires of current and future guests, hoteliers can lead successful guest-centric transformation.

Improving digital security and reducing cyber attacks

As hotels become increasingly dependent on technology and move to embrace the efficiencies of digital, they need to be aware of potential weak spots in a hotel’s cyber security. Any data breach or cyber attack – whether through the hotel’s systems or third-party applications – can have significant financial and regulatory implications. We look at how hoteliers can securely protect their assets from the many opportunities that properties present for hackers.

What does the future hold for EU nationals?

An on-going concern around Brexit for the hotels industry is the status of EU nationals workers’ rights. Depending on circumstances, an EU national currently resident in the UK for 5 years or more will obtain a form of permanent residence known as ‘Settled Status’. Those who have been resident for less time will initially being granted ‘Pre-Settled Status’, which they can later convert to ‘Settled Status’. Future immigration changes will depend on which Government will be in place whether there is a ‘deal’ or ‘no deal’. We look at what proposed immigration system may come in place and what this means for EU workers.

Contact us

Samantha Ward

Samantha Ward

Hotels Sector Leader, PwC United Kingdom

Tel: +44 (0)7923 289 644

David Trunkfield

David Trunkfield

Hospitality and Leisure Leader, PwC United Kingdom

Tel: +44 (0)7764 235446

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