Savoy Hotel

Can the hotel industry growth continue through 2018?

Thanks to factors such as global economic recovery and the increased attractiveness of the UK following the fall of the pound after Brexit, the hotel industry has seen steady growth over the past couple of years. However, can it continue into 2018?

The forecasts

In London last year the hotels sector saw growth of 2.6% in occupancy and Average Daily Rate (ADR) gains of 6.3%. Given the problems that the capital has had with terrorism and uncertain corporate and consumer supply the growth was impressive. However, PWC – in its 2018 Hotels Forecast – revised figures downward for 2018 for London, with a drop in Revenue per available room (RevPAR) gain to just 2.4%, roughly a third of 2017. Regionally, occupancy rates have been in the 70%s since 2011 and PWC forecasts 76% for 2018 with a modest upward tick for next year in RevPAR growth (2.3%) and ADR (2%).

Factors that could affect ongoing growth

The negative

1. Cyber security – many industry experts have highlighted cyber attacks as a potential obstacle to ongoing growth for the hotel industry. According to recent research, although cyber attacks are now considered one of the biggest risks to business, two out of three of bosses at Britain’s biggest companies haven’t been trained in how to prevent them or deal with them. This could be seriously problematic should the worst occur in the hotels industry.

2. Knock on costs from Brexit – the drop in the value of Sterling has been given a lot of airtime when it comes to looking at the way Brexit has helped growth in the UK hotels industry. However, there are costs too, such as the increased expense involved in trying to fill vacant positions because EU workers have already left, as well as the higher costs of imported goods.

3. Changing markets – although there has been a lot more North American tourism in the past 12 months, some London hotels have reported weaker weekend domestic demand. Plus, luxury markets report a slight sag in the interest from Middle Eastern markets. Corporate travel too has seen a decline with Brexit uncertainty named as one of the key influences.

The positive

1. Upcoming events – 2018 is going to be something of a bumper year, from Meghan and Harry’s wedding, to the biennial Farnborough International Air Show (which attracts around 80,000 visitors), the Women’s Hockey World Cup and the NBA Regular Season Basketball.

2. Crossrail – London hotels could well see ongoing growth as a result of better transport links for London and the South East.

3. Staycations, meetings and conferences – the number of meetings and conferences held in the UK rose 8% in 2016. “Staycations” (vacations in the UK) are popular although we still love to travel overseas – Brits went on 45+ million foreign holidays in 2016 and a rise in this trend could contribute to threats to the industry.

4. New hotel openings – these are taking place all over the country. The partnership between hotels and construction is currently very productive. These are just some of the projects currently under way:

• Heathrow Airport – projects under way include a 190 room Staybridge Suites and a 433 room Holiday Inn Heathrow
• London apartment style accommodation – construction projects just finished or soon to complete include Wilde by StayCity and Go Native.
• London luxury hotels – construction projects on the go include 13 new 4 star properties with almost 2,000 rooms to open, including Park Regis Shoreditch
• Liverpool – currently under construction is the 5 star Principal Liverpool
• Manchester – projects due to complete for 2018 include a 212 room Crowne Plaza and 116 room Staybridge Suites
• Belfast – multiple construction projects are currently under way including, a 4 star 237 room Maldron Hotel Belfast City
• Bath and Bristol – a Budget Z hotel is due for completing in each city in 2018

When it comes to construction and the hotel industry at RG group we take market development very seriously. If you have projects in mind – or are looking for inspiration – we are here to help.

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