Strong London hotel room rate rise predicted
UK hotel industry outlook 2006 – TravelMole guest comment by Marvin Rust, hospitality managing partner at Deloitte
Regional hotels are set to outperform those in London in 2005, with October year-to-date figures showing revenue per available room (revPAR) growing by almost 4%, compared to London’s 1.6% growth.
While average room rates have grown 4% to £101 in London, occupancy has shrunk by 2%. Airport hotels have continued to be one of the strongest performing market segments due to the reliably high occupancy levels and record inbound and outbound tourism in 2005.
The hotel market’s reaction to the terrorist events of July 2005 demonstrated the resilience of the London market and the continuing attraction of the city to visitors.
Although weekend occupancy levels were the slowest to recover, rate increases mitigated the overall impact of the drop. The regions were less impacted by the July events largely due to their distance from the terrorist attacks but the regions performance was also consistent with their more robust business model to cyclical changes and geopolitical shocks.
Hotels are trading at almost historical highs in occupancy levels resulting from the industry creating demand for products which previously were not available on the market (a number of recent openings like the Soho Hotel and Malmaison being good examples of niche offerings).
Fortunately the downturn in consumer spending does not seem to have had a significant impact on the industry to date and with the strengthening of the US dollar there should be some counterbalance in 2006 as American tourists are attracted to the UK – a particularly important source market as they tend to be the highest spenders per capita.
Looking to 2006, Deloitte forecasts a slight increase in occupancy levels in London, around 1%, but room rate will continue to grow strongly at around 7-8%.
The hotel industry will continue to face the threat of extraneous shocks, however, history shows that the industry can bounce back after these blows.
Phil Davies
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