PwC Hotels Forecast 2018: North West hotels see solid growth driven by weak pound, but at a slower pace

·        Weak pound driving foreign tourists to UK  leads to high levels of hotel trading in H1 2017

·        19,000 rooms to be added across the UK in 2018. Cities with large pipelines for 2018 include Manchester, Liverpool, Belfast, Glasgow, Edinburgh, Liverpool and Bath.

·        Manchester and London hotels withstand impact from terrorist attacks

·        Growth forecast for 2018, but continued uncertainty and a supply spike in London means pace will slow

·        Deals activity to rise 43% year-on-year in 2017, but will be 10% lower in 2018

PwC’s latest UK hotels forecast shows that a mixture of economic growth deceleration, the wearing off of the weak pound effect on inbound tourism, and a large increase in new hotel rooms, mean growth will come at a slower pace in 2018.

Hotels in the UK regions have seen occupancy levels increase 1.2% in the six months to June this year compared to the same period last year. Hoteliers in Liverpool and Manchester have seen positive levels of growth particularly when it comes to occupancy levels.

High occupancies helped hoteliers raise ADR in H1 which showed a 3.2% gain, taking rates to £69.50. The regions have seen growth continue in July, according to STR, with RevPAR up by 4.4% to almost £49.

Hull performed particularly well which saw a 13% lift in occupancy after being awarded the City of Culture status in 2017. Cardiff, which saw RevPAR reach almost 11% after the city hosted this year’s Champions League Final in June. Elsewhere Edinburgh and Belfast have seen ADR gains alone of 15% and 13%.

The outlook for London remains highly positive, with year-on-year occupancy growth of 2.3% forecast for this year with a further marginal increase of 0.2% in 2018, taking occupancy up two percentage points to 83%. Average Daily Rate (ADR) growth remains resilient and is forecast to increase 3.6% in 2017 with additional growth of 2.2% in 2018, taking ADR to £145 and £148 respectively. This drives a robust revenue per available room (RevPAR) gain of almost 6% this year and a further 2.4% in 2018, taking RevPAR to £120 this year and £123 in 2018. Some of the highest metrics of any city globally.

                                                                         London                                                         Regions

A: Actual F: Forecast














ADE (£)














% growth on previous year






















Source: Econometric forecasts: PwC August 2017 Benchmarking data: STR July 2017          



Commenting on the latest forecast, Liz Hall, head of hospitality and leisure research at PwC, said:

“The weak pound has encouraged record numbers of international leisure tourists to visit London in 2017 and our analysis shows many other cities have also benefitted. The terror attacks in London and Manchester appear to have had limited impact on visitor numbers, meaning hotels have performed strongly so far this year. The weak pound doesn’t appear to have boosted international corporate travel to the UK, perhaps reflecting corporate uncertainty around Brexit.

“Next year, hotels are facing a number of challenges which could restrain growth, if supply decreases. While the pound is bringing leisure tourists in, it is also creating a harsher environment for hoteliers as they have to contend with rising costs and squeezed margins with the weak pound pushing up the cost of imported goods.

“There are also labour issues. The Brexit vote has prompted some workers from EU countries to leave their jobs and some hotels are struggling to fill these vacancies and facing higher costs when they do so.”

According to data from AM:PM, a further 19,000 rooms are to be added across the UK in 2018. Of this total, over 7,000 rooms are expected to open in London. Other cities with large pipelines for 2018 include Manchester, Belfast, Glasgow, Edinburgh, Liverpool and Bath.

Liz Hall added:

“We expect the hotel sector outside London to continue growing in 2018, albeit at a slightly slower pace than 2017 driven by a combination of factors, such as the weak pound effect and the conferences and meetings market. Staycations may also help trading but we seem wedded to our overseas holidays too, despite the weak pound abroad.

“Occupancy rates remain a crucial benchmark for profitability for the hotel sector. Regional occupancies have climbed back into the 70s since 2011 and have been creeping up since then to reach historic highs. Looking to 2018 we expect ADR to drive further growth in RevPAR.”

Outlook for deals in the hotel sector

The total value of 2017 UK hotel M&A activity stood at c. £2.3bn at the end of July, and although up only 10% over the same period last year, reflected a gradual recovery in investor sentiment following the slowdown in the second half of 2016.

PwC forecasts a further £3bn of deals to be completed during the remainder of the year bringing total deal volume for 2017 to around £5.3bn. This will be driven by strong RevPAR growth plus some of the larger deals that had been expected to close by the end of 2016 being completed this year.

In 2018 we anticipate further overseas inbound and domestic investment into the hotel sector. However, with China placing limits on foreign investment and slower RevPAR expected, we forecast deals volumes to reach levels 10% lower than 2017 at around £4.8bn.

Sam Ward, UK hotels leader at PwC, added:

“The ongoing economic uncertainty has led to the majority of activity we are seeing this year involve single asset deals, with some vendors finding more investor appetite by breaking up portfolios into smaller assets.

“Despite this, investment levels are still up on last year and the majority of investors are still from overseas with the weak pound making prices more desirable. With some significant portfolio transactions scheduled to complete in the second half of the year, we forecast year-on-year volume growth of 43% for 2017.

“Next year we forecast the momentum from this year to slow down with further restrictions on China foreign investment and slower RevPAR growth across the UK affecting deals.”

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