12 January, 2009: Hotels in London face a 23% drop in revenues per available room this year, a new study warns.
With a 1.8% decline in GDP now forecast, the prediction for 2009 from PricewaterhouseCopper´s hospitality & leisure team is a near 10% tumble in UK RevPAR, with London RevPAR plummeting by 23%, due mainly to a fall in room rates.
The UK could now see RevPAR decline by 9.4% while in the provinces the fall is more muted (3.4%) than the capital, according to PwC.
For London the impact of reduced business travel and spend is more severe, although the impact of eurozone tourists may soften the blow in the short-term.
PricewaterhouseCoopers head of research for hospitality and leisure Liz Hall said:"
Falling consumer spend and investment, combined with the prolonged financial market crisis will restrict economic growth over the next 12 months.
“We now expect GDP to contract by two per cent in 2009, following an estimated 0.9 per cent growth last year.
“This harsher environment means hospitality and travel budgets are under even more pressure as firms tighten up on cost control. Although visibility is restricted, evidence points to an unprecedentedly poor hotel outlook for the year.
“The deteriorating economic climate has spread across the manufacturing, construction and services sectors, causing unemployment to rise to its highest rate in more than eight years.
“Inflation is set to fall rapidly in 2009, providing scope for further monetary loosening this year. However, very low interest rates and a significant fiscal stimulus may prove unable to kick start the economy this year and with no clear signs as to when business travel demand might be re-awakened, what was our downside scenario now seems the most likely outcome for 2009 - meaning record RevPAR falls in London this year.
“Due to the currency parity of the pound and euro, the domestic market should become stronger as more people decide to holiday in the UK, however lower margins are expected and there is likely to be a return to self-catering and campsites over hotel-based holidays."