Decelerating RevPAR growth driven by economic and political uncertainty
High rates of new supply growth in London and the regions
- Inbound travel hampered by a “wait and see” attitude from potential tourists to the UK
London to see relatively resilient ADR growth
Our forecast for London for 2019 calls for only marginal occupancy growth of 0.3%, nudging occupancy to (a very high) 83.6%. ADR (Average Daily Rate) is expected to see around 1.4% growth, taking it to £150.90, a record in nominal terms. But allowing for inflation means prices are in effect going backwards. ADR growth drives RevPAR (Revenue Per Available Room) growth of around 1.7% this year, taking it to £126. In 2020, we anticipate much of the same, as ADR pushes RevPAR up by 1.4% to £128.
Demand and pricing deceleration to drive softer regional forecast
As weaker demand and higher new supply additions begin to bite, we anticipate demand and pricing will decelerate in the regions in 2019. We forecast a 2019 marginal occupancy decline of -0.1%, meaning occupancy stays around 76% (still high by historical levels), after a record high in 2018. ADR is expected to see only around 0.5% growth, taking it to £72.50. RevPAR is predicted to show growth of only 0.4% this year, taking it to £55.10. In 2020 we anticipate a similar pattern; as occupancy growth remains weak, ADR manages around a 0.8% gain taking it to £73.10, buoying RevPAR up by around 0.8% to £55.50.
2019 travel outlook
Despite continued macro and geopolitical uncertainty, international leisure travel held up relatively well in 2018, supported by the weak pound. Operators we have spoken to expect the pound to remain advantageous against the euro, at least until the Autumn. However, some reports suggest a “wait and see” attitude is developing among potential travellers to the UK, especially those from Europe. Events such as the ICC Cricket World Cup in July, Netball World Cup in Liverpool, 2019 Manchester International Festival and UEFA Euro 2020 football championships should provide an uplift for hotels.
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