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Will UK Hotel Performance Slow Down in 2018?

“Hotels’ good fortune continues but as uncertainty weighs in, is this as good as it gets?” - PwC

The UK hotel industry has seen record trading figures for 2017. Hotels in London saw a growth of 5.8% over 2016 results, whilst hotels in the provinces had a growth of 2.4% over 2016.  But forecasts for 2018 are not quite so positive.

Accountancy firm PwC made predictions in their UK hotels forecast 2018 report that growth in the sector would slow down in the coming year as the stimulus of a sluggish pound starts to weaken, and new supply kicks in.

This factor combined with volatile global politics, the London and Manchester terrorist attacks and the continued uncertainty of Brexit deals and policies, PwC made somewhat reserved predictions for the hotel sector in 2018, but still with a reasonably robust growth forecast.

Hotels in London saw a growth of 5.8% over 2016.

London stands firm

London hotel performance is expected to stay positive in 2018, with year-on-year occupancy marginal increase of 0.2% compared to 2017. The average daily rate (ADR) is predicted to increase by 2.2% to £148 next year. As a result, revenue per available room (RevPAR) is forecast to grow by 2.4% in 2018, a rise of £123.

This slowdown in performance is said to be somewhat down to the extra 19,000 bedrooms that shall be added to the UK hotel industry in 2018, according to AM:PM. London is expected to be driving this expansion with an additional 7,000 new bedrooms. Manchester, Belfast, Glasgow, Edinburgh, Liverpool and Bath leading growth in the regions.

 

Brexit breeds uncertainty  

PwC’s Head of Hospitality and Leisure Research, Liz Hall, says that whilst the weak pound has encouraged international tourism to London in 2017, it doesn’t seem to have boosted corporate business from overseas, “perhaps reflecting corporate uncertainty around Brexit”.

Hall continued: “Whilst the pound is bringing leisure tourists in, it is also creating a harsher environment for hoteliers as they have to contend with raising costs and squeezed margins with the pound pushing up the costs of imported goods.

“These are 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.”

2018 outlook

Hotel deals next year are expected to be 10% lower at approximately £4.8b. Overall, PwC believes the pace of hotel performance growth we’ve seen in 2017 is not sustainable through to the second of the year and into 2018. The boost coming from a weak pound will probably continue but we can expect growth to be weaker.

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