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PwC Hotels Forecast 2019: Uncertainty to stall growth

Hotel trading growth is set to flatten in the year ahead due to economic uncertainty, weak business travel demand and an influx of new rooms scheduled to open across the country, according to findings by PwC.

The PwC’s Hotels Forecast 2019 analysis found that the outlook for London has levelled out with year-on-year occupancy growth of only 0.1% and a marginal fall of -0.5% forecast for 2019, which will see occupancy levels drop one percentage point to 81% in 2019.

Average Daily Rate (ADR) is forecast to see a marginal uplift over the next year with 0.2% growth for 2018 taking ADR up £1 to 149  and 0.8% for 2019 taking the average rate up another £1 to £150. Revenue per available room (RevPAR) growth will remain static with 0.3% forecast for both 2018 and 2019, a big contrast to the 4.6% growth in 2017. Overall, RevPAR is expected to remain at £122 for 2018 and 2019.

                                                                        London                                                         Regions

A: Actual F: Forecast







Occupancy %







ADR (£)







RevPAR (£)







% growth on previous year






















             Source: Econometric forecasts: PwC August 2018 Benchmarking data: STR July 2018

However, according to research from the global hotels data company STR, a potential 5,000 new rooms could open in London in 2018 with a further 4,300 in 2019. This is on top of the 38,000 rooms added in the previous five years.

Commenting on the latest forecast, Liz Hall, head of hospitality and leisure research at PwC, said: “2017 was a hard act to follow for hotel trading, in terms of growth and 2018 has been held back by uncertainty, slower economic growth, significant supply additions and reported stuttering business travel. This is despite the weak pound buoying leisure travel, the Royal Wedding and the International Farnborough Air Show effect. However, trading in absolute terms remains extremely high by historic and global standards for London and by 2019 we forecast both ADR and RevPAR to reach new records in nominal terms.

“For a sector heavily reliant on people to deliver its products and services, the shortfall in availability of EU nationals remains a concern for hotels and the weak pound has pushed up the costs of retaining staff and importing goods within the sector.

“Following a number of years of strong revenue growth when there was not the imperative to focus on costs, prudent operators and owners need to adopt a stringent approach to operating costs growth in 2019 to preserve profitability.”

Outlook for the regions

Occupancy levels in the regions have been averaging 76% since 2015 and are forecast to remain around this level for the next year but to see a -0.3% decline in 2018 and no growth forecast for 2019.

ADR growth is forecast to slow compared to 2017, with an anticipated 1.3% increase for 2018 taking ADR to £72 and a further 1.2% in 2019 lifting rates to £73.  RevPAR is forecast to see a 1% uplift and a further 1.2% in 2019 taking it to £55, up from £54 in 2017.

Hall added: “Our forecast shows RevPAR in the regions to end 2019 23% ahead of pre-recession peaks in nominal terms but lagging in real terms by 7%. Demand continues to be driven by inbound tourism, domestic holidays and events. The ICC Cricket World Cup is being held across 11 locations in England and Wales which could help regional hotels in 2019.

“Occupancy rates have been creeping up from 66% in 2009 to an average of 76% in 2015. We forecast rates to remain at this level despite over 40,000 rooms to be added in the regions in 2018 and 2019. A continuing structural supply shift towards a greater proportion of budget rooms will sustain occupancy levels.”

Outlook for deals in the hotel sector

Total deal volume for 2017 reached £4.9bn, up 34% on the year prior, driven by a series of large portfolio deals. In the first half of 2018 the UK has already seen £3.8bn worth of deal activity, an 80% rise on the first half of 2017. We forecast total deal volume to reach c£6.8bn by the end of the year, a 40% increase on last year and the second highest volume of hotel investment in the UK after record levels of £9.3bn in 2015.

For 2019 deal activity is forecast to slow down with activity to fall by around 34% from 2018 to c£4.5bn.

Sam Ward, UK hotels leader at PwC, said: “The UK hotel market has generally shown deal volumes closely tracking RevPAR growth over the past decade. However with a swathe of significant portfolio deals completed in the first half of this year and with more in progress, deal volume for 2018 is set to buck this trend. This will mark only the second year deal volumes are expected to exceed RevPAR growth.

“We anticipate a slowdown in portfolio deal activity in 2019 due to a combination of longer term investors entering the UK hotel market, US funds refinancing their hotel portfolios to take advantage of the favourable debt terms currently available and uncertainty around leaving the European Union in March.”

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