Average hotel rates in London could reach up to £212.6 in 2023, an increase of 18 per cent on 2021, with moderates increases also set for the UK's regions as average daily rates (ADR) are pegged at £91.5 in nominal terms.
The figures form part of PwC’s UK Hotels Forecast 2022-23, which includes modelling for a ‘mild winter scenario’ – where international travel returns to 87 per cent of pre-pandemic levels by the end of next year – and ‘harsh winter scenario’ that sees disruptions to energy supplies and air passenger numbers at 75 per cent recovered.
The forecast projects ADR of £212.6 in London in a mild scenario, while a harsh winter will likely see rates of £207.2 – a 15 per cent year-on-year increase and still well above £153.07 in 2019 – and £90.4 in the regions.
The report warned against an “operationally challenging” year ahead as talent shortages will be exacerbated by double-digit inflation, rising energy costs and a looming recession.
London’s swift post-pandemic rebound and influx of international visitors will likely curb the impact of a possible recession, but PwC lead hotel consultant Stephen Broome said the UK regions “look set for a challenging year ahead as inflationary pressures and falling consumer confidence hit operating costs and domestic leisure demand and in real terms wipe out the recovery in ADR seen in 2022”.
The forecast predicts hotel occupancy rates in London could reach 76 to 78 per cent in 2023, with a slightly weaker figure of 71 to 77 per cent occupancy for the regions.
Zeroing in on corporate demand, David Hart, CEO of RBH Hospitality Management, which manages a large range of UK hotels, said corporate volumes across the portfolio are back to 70 per cent of 2019 levels, “but it’s not the same accounts that have come back and there’s a huge amount of discrepancy across the different markets”.
He said business from IT and communications sectors, for example, hasn’t returned, but bookings from the oil and gas sector “have come roaring back and are already back to pre-pandemic levels”.
While business on the books for the fourth quarter of 2022 “remains strong” the report noted that recessionary conditions will dampen demand towards the end of 2023.
“After strong post-pandemic recovery across the sector, hoteliers are facing some difficult headwinds in the year ahead,” said Sam Ward, UK hotels leader at PwC.
“Energy costs will make it a tough winter in addition to the ongoing staffing crisis and inflationary costs.
“While the continuing growth of international travellers could provide a welcome boost, mainly for London, there is still a fall in consumer confidence that may hit domestic leisure demand elsewhere,” she said.