London hotels set for tough year

Hotels in London could be set for a rollercoaster ride as they face the worst economic conditions in 15 years, according to the PricewaterhouseCoopers LLP report. It also predicts RevPAR could be set to fall by almost 12 per cent in 2009 as occupancies tumble.

Largely driven by London, UK hotels have seen a boom period of unprecedented revenue growth and investment over the past five years.

This means that as London stares down the barrel of a recession, they are at least in good shape. However the economic slide will take London’s RevPAR (the industry’s benchmark) from £94.28 in 2008 to £82.92 in 2009 as companies cut costs and travel budgets, alongside squeezed consumer income.

The descent began in September of this year, and despite following a fifth successive year of room rate growth, the Autumn is seeing a demand slowdown in London hotels with occupancies falling and room rates set to follow.Robert Milburn, UK Hospitality & Leisure Leader (H&L), PricewaterhouseCoopers LLP, said:“The ricochet from continuing turmoil in the financial markets, the sharp global economic slowdown, and the negative consumer and corporate sentiment means that the outlook for travel and hotel demand has deteriorated significantly in recent weeks.

But the outlook for 2009 is even more worrying.”

“Occupancy in London looks set to drop to 70 per cent next year. The capital has not seen a decline on this scale since 9/11, and before that as far back as 1991, when they fell as low as 65 per cent.” “Room rates are not safe either and even if hotels manage to keep maintain room rate levels in 2009 this will represent a real reduction of some four per cent when inflation is taken into account,” he added.