Overall weaker growth for UK hotels due to political and economic uncertainty - PwC

Oct 03, 2019

The prediction forms part of their UK Hotels Forecast 2019-2020, their analysis into market conditions for hotels over the next 12 months which will see dips in performance across regionalUK hotels, and marginally slower growth in London. 

Outlook for London

PwC expects London will hold on to growth for the rest of 2019, buoyed mainly by international tourism as a result of the weak pound. However, with a relentless supply of new rooms, maintaining that growth will get harder in 2020, with occupancy forecast to slip marginally by -0.3% in 2020 to 84%. Average Daily Rate (ADR) is forecast to see a marginal lift  of 1.3% for 2020 taking the average rate up to £153.4. Overall Revenue per available room (RevPAR) growth is forecast to rise by 3% and 1% for 2019 and 2020 respectively, reaching £128.9 in 2020.

Outlook for the regions

Overall, it’s been a difficult year so far for the regions. 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 regional business market and stop a fall in RevPAR for the second consecutive quarter of 2019.  And being more reliant on UK GDP, regional hotel market conditions are expected to get tougher. PwC’s forecast for the regions for 2020 is a -0.6% decline in occupancy growth, a slight gain in rate but a drop in RevPAR of -0.3%.  

Globally, tourism is on the rise. In 2018 there were a record 1.4 billion international tourist arrivals. The UNWTO World Tourism Organisation reports that international tourism continues to grow, above the rate of global economic growth, forecasting a moderate growth of between 3% and 4% in international arrivals in 2019. 







A: Actual

F: Forecast







Occupancy %







ADR (£)







RevPAR (£)







% growth on previous year 























Source: Econometric forecasts: PwC July 2019; Benchmarking data: STR June 2019


Sam Ward, UK Hotels Leader at PwC said:

"The UK hotel sector is at a pivotal point. Looking ahead to 2020, while hotel performance will vary widely by geography, segment and business model, we remain overall more cautious in our outlook. This latest UK Hotels Forecast reflects political and economic uncertainty, weaker business and leisure confidence, and the especially  high number of new hotel supply additions in some markets around the UK, which have all created challenging conditions for hoteliers.

“Sporting events have had a positive effect for hotels this summer.  The ICC Cricket World Cup in particular helped boost the fortunes and particularly the ADR of hotels in hosting cities London, Manchester, Birmingham, Nottingham, Leeds and Southampton.  And UEFA Euro 2020 should equally boost London and Glasgow in 2020.  

“However the pressure of rising costs for operating hotels, which continues to increase above UK inflation, puts any modest revenue growth under strain. The devaluation of the pound has also pushed up the cost of importing food and drinks for hotels. Additionally, low UK unemployment rates, a reduction in EU nationals for recruitment due to Brexit concerns, and above-inflation increases in the minimum wage have all contributed to increased costs associated with acquiring, training and retaining staff."

Outlook for deals

For investors, cautiousness meant that UK hotel investment volumes have seen a decline of 35% in the first half of 2019 to c. £2.6 billion, compared to the higher than average levels in the first half of 2018. Despite this, there is still an expectation for continued investment from Europe and the Far East for the remainder of the year, given the relative low value of the pound.  Assuming completion of some reported current deals, PwC forecasts deal volume to reach c£5.1bn in 2019, a 28% decrease compared to 2018.

Even if a Brexit deal is secured by the end of 2019, PwC forecasts a further period of time before stability is regained and investor confidence returns to the UK, with 2020 hotel transaction volumes forecast to marginally fall to c. £4.8 billion.

Sam Ward, UK Hotels Leader at PwC, said: 

“What we have seen in the first half of the year has been a more cautious approach by investors which has been dictated by the uncertainties of Brexit becoming more acute, ongoing volatility in the market and weakened business sentiment. Portfolio transactions are down more than a third in comparison to the same period last year and single asset transactions are down more than a quarter.

“Until there is further clarity on Brexit we expect the cautious approach to investment to be reflected in the second half of the year. Even if a Brexit deal is secured by the end of the year, it will take some time before stability returns.” 


Notes to editors

  1. RevPAR (Revenue Per Available Room) is a key industry benchmark. It can be calculated by multiplying the average achieved room rate by the average annual room occupancy rate.

  2. The full forecast can be viewed online from 00:01 Thursday 3 October at https://www.pwc.co.uk/hotelsforecast

  3. The PwC hotels forecast is based on quarterly econometric analysis of the hotel sector, using an updated PwC macroeconomic forecast released in September and historical statistics supplied by STR and other data providers.

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