Leading global city has seen recent record breaking performances and unlikely to be held back for long by softer trading in 2013.
“London has a post Games legacy of modernised and new hotel products to attract visitors and compete with the world’s best.” Robert Milburn, UK hospitality and leisure leader, PwC
Average daily room rates (ADR) are expected to dip in 2013 after the record highs experienced over the 2012 London Olympics.
London is the largest urban area in Europe, a mega city and one of the world’s largest financial centres. It leads in many fields and global business clusters include creative industries, pharmaceuticals, finance and education. It is one of the world’s leading destinations for international tourism with extensive cultural, sporting and historical attractions. In 2011 a total of 26.3 million staying visits came to London, a very marginal 1% improvement against the previous year. After the recessionary downturn of 2008 and 2009, which saw reduced international arrivals, London has made a strong recovery, with figures now edging closer to the levels last seen in the mid 2000s.
Supply trends
London has seen above average levels of new hotel supply added in recent years and there is worry of a post Olympic supply overhang with another 5,000 rooms opening in 2013 – including the Shangri La; the London Edition, the Beaumont and many branded budgets. This follows around 8,000 new rooms in 2012.
Opportunities
London’s fundamental strength is that its status as one of the leading global cities means it can attract people from all around the world, including those from emerging markets whose economies continue to prosper. There are also opportunities: to capitalise on the media spotlight shone on London during the Olympics, to attract new markets and to simplify the process for obtaining visas for tourists from China. London was left out of many tour programmes in 2012 but will be back in 2013. Business travel should benefit from any economic upturn.
Economic outlook
London has traditionally been the jewel in the UK economy, with property prices and consumer spending defying gravity, whilst most of the UK suffers in recession. Whilst the hotel market is likely to suffer an Olympic hangover in 2013, the economy is likely to do better. Unemployment is falling and growth is expected to pick up.
Forecast and rationale
Average daily room rates (ADR) are expected to dip in 2013 after the record highs experienced over the 2012 London Olympics. Stronger than usual supply growth will also result in declines in occupancy rates. A combination of these two factors mean that revenue per available room (RevPAR) will be down by around 6.8% next year. While we do expect a weaker hotel market in 2013, as the inevitable Olympic hangover kicks in and the surge in new supply during 2012 and 2013 bring down occupancy and rates, we don’t expect these temporary factors to hold London back for long.
Annual hotel statistics
|
Occupancy |
ADR |
RevPAR |
|
|---|---|---|---|
| 2010 |
82.3% |
123.00 |
101.40 |
| 2011 |
82.1% |
133.08 |
109.51 |
| 2012F |
80.2% |
142.95 |
115.08 |
| 2013F |
77.1% |
139.07 |
107.26 |
% growth on previous year
|
Occupancy |
ADR |
RevPAR |
|
|---|---|---|---|
| 2011 |
(0.2%) |
8.2% |
8.0% |
| 2012F |
(2.3%) |
7.4% |
5.1% |
| 2013F |
(3.9%) |
(2.7%) |
(6.8%) |
Long run (2002-2012) averages and growth
|
Occupancy |
ADR |
RevPAR |
|
|---|---|---|---|
| Average |
78.1% |
111.12 |
87.43 |
| Average growth |
1.08% |
3.07% |
4.25% |
Source: Econometric forecast: PwC December 2012
Benchmarking data: STR Global
Notes:
Annual hotel statistics, long-run averages and forecast are
all in local currency
2012F – 9 months actual data + 3 months forecast
2013F – Forecast
Occupancy growth: % change on prior year
