London hotels can look forward to relatively good times ahead but the impact of weaker economic growth and faltering domestic business demand could turn 2012 into another poor year for many hoteliers outside the capital.
The prediction comes from PricewaterhouseCoopers (PwC) following an update of its September 2011 UK Hotels Forecast.
Robert Milburn, Hospitality and Leisure Leader at PwC, said: “The regions have traditionally been more sensitive to changes in the UK economy than London,which is influenced more by international factors. With the Office for Budget Responsibility (OBR) now forecasting economic growth in 2012 only half that envisaged earlier this year, we expect significantly lower RevPAR growth as a result.”
PwC suggests that for every one percentage point fall in GDP, regional occupancy rates could also fall by about one per cent. This has a knock-on effect on room rates and overall revenues.
PwC also notes the Olympic Games, the Diamond Jubilee and the Farnborough International Air Show should counterbalance some of this negative impact, especially for locations close to these events next year. This is likely to mean some growth for those in the right place at the right time, as well as for enterprising hoteliers.
“The reduction in GDP growth forecasts for 2012 further compounds the difficulties facing hoteliers in the UK regions,” said Milburn. “In what some economists have christened ‘the new normal’, profits are likely to decline as cost inflation continues to outstrip top line growth.
“London will not be immune from these tougher times either. With negative RevPAR growth forecast in all but Q3 2012 and a post-Olympics hangover on the cards for 2013, it may be time to implement Plan B in preparation for a prolonged period of generally low, slow and erratic demand.”
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