Based on its new report, PricewaterhouseCoopers (PwC) is maintaining a cautious outlook for UK hotels in 2017 due to security concerns, tight corporate budgets, above average supply growth, and consumer uncertainty. On the flipside, Brexit created a weaker pound, which is seeing a big influx of inbound tourism.
Here are the biggest discussion points and major takeaways for hotels looking toward 2017.
Performance to suffer in London
Growth is expected to slow dramatically compared to the other regions. While occupancy, average daily rate (ADR), and RevPAR are grossly higher in London, growth on previous year is set to be -0.8% for occupancy and -0.5% for RevPAR. ADR will grow slightly by 0.4%. Despite the recent drops, overall new supply openings are up 2.5% since 1995, and will still have the fullest rooms globally at 80%.
Over 7,000 new rooms are predicted to open in London, but the city is suffering from a double-blow that includes a lack of corporate demand and growth in competing travel markets.
With the value of the pound falling, hotels will need to work harder and smarter to attract leisure travellers and appeal to the larger contingent of people on staycations.
Regions experiencing a comparative boom
The UK regions will see growth of 0.5%, 2.3%, and 1.8% in occupancy, RevPAR, and ADR respectively. At 77%, the regions are expected to record their highest occupancy to date -even with a further 11,400 rooms to open.
Birmingham, Brighton, and Manchester were the best performing cities. The major increase is put down, in part, to structural supply shifts that tend towards a higher proportion of budget rooms. Manchester is expected to rise to the top of this list in 2017.
Slowdown of deals
Deal activity in the hotel sector will not replicate the stellar 2015 period that saw £9.3 billion in UK hotel transactions. Hotel deal volumes are expected to lower than 2015 and 2016 (£5.5 billion) in 2017 at £5.1 billion. This is because it’s expected there will be more single assets and smaller clusters, as opposed to the large portfolios of 2015.
The sharing economy is hurting
Peer-to-peer accommodation platforms are being treated more seriously by hotels as they start to see an effect on their bottom line. A key P2P player saw growth of 54% this year and long range forecasts up to 2025 see further growth in this sector.
For the time being, hotels need to steer into the curve and focus on the trends they can control.
In 2017, take note of the best ways to attract ‘staycationers’, make the most of the corporate travellers you do have by offering promotions and extras, and look to encourage bleisure and workventure stays wherever you can.
Be savvy with revenue management and consider these tips on increasing ADR. At the very least, hoteliers can stay a step ahead of the competition by implementing a real-time market intelligence tool into your business strategy.