Sector "overwhelmingly more optimistic"
The early signs are that the UK hotel industry is over the worst of the recession, PricewaterhouseCoopers (PwC) reported today (September 17).
But while it said that hoteliers were more optimistic than six months ago, it warned the industry still faced tough times.
One of the key findings in PwC's UK Hotels forecast: Not out of the woods yet is while leisure has helped fill the gap caused by the absence of business travellers, room rates have dropped nearly £20 in the past year.
It predicts that revPAR (revenue per available room) will fall by 12.1% this year and slow to a 2.4% drop in 2010.
The report said: "Despite a lack of visibility in the recovery, there is talk that there are better times ahead and the mood of the n hotel sector is overwhelmingly optimistic.
"Our research this w summer shows three quarters of hoteliers polled recently were more optimistic than they were six months ago.
"But still around 36% of operators told us they have seen no green shoots in the hotel sector, more than twice the proportion of those that had."
The forecast went on to say: "The sector is by no means out of the wood yet but a way out now looks closer.
"There are still unknowns that could upset this as well as slow economic recovery delaying the revival in conferences, meetings and corporate travel.
"Our latest forecast suggests the sector (especially rates) will remain under pressure into 2010; albeit we expect the rates of decline to slow substantially."
Robert Milburn, PwC's UK hospitality and leisure leader, said: "While domestic and overseas leisure tourism has been a tonic for UK hotels, the stark absence of corporate travel has left the sector severely weakened.
"Overseas visits are down 9% and air travel is expected to contract further, making the return of the business and conference markets critical for a full recovery."
"We last saw a room rate fall of this magnitude (8.1% in 2009) in 2002 when rates fell almost 6%.
"While rate declines will slow at last, economic and travel fundamentals remain weak and despite accelerating cost cutting programmes, the evidence points to more savage trading at the end of the year.
"Rate declines will ease in 2010 but we foresee no revPAR growth in any quarter over the year."
PwC predicted that occupancy in London will remain relatively high at 79% over 2009-2010 but that rates will continue to fall, although at a much slower speed, than this year.
It said they would not start rising until 2011.
Mr Milburn said the recession had caused London to fall from being the world's second most expensive destination, to its 22nd.
But he added that while it remained a "must see" destination, "it remains to be seen how long these hotels can afford to offer such attractive rates."
Liz Hall, PwC's head of hotels research, said: "Average room rates in London have been rising for five consecutive years
"Now a room will cost £10 less than in 2008 and could cost £20 less by the end of next year.
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| Robert Milburn |
"Midscale customers have been able to negotiate discounts at their usual locations rather than switching to a cheaper option.
"We are also seeing a selected reduction in brand standards among some chains as hotels seek to contain costs.
"Indeed some four and five star hotels are looking to reduce their star ratings in order to cut unnecessary expenditure in areas not valued by guests."
PwC said it also found little evidence that the meetings and conference sector was recovering.
As budgets were cut, the vast majority of bookers were looking for lower rates and trading down to lower class venues.
However there were signs that rates in some areas, including London and the South East were seeing slight rate rises.
It added: "In terms of volume over the next 12 months, 34% of agents think they will organise fewer events, compared to 29% of corporate planners and 22% of associations."
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