UK hotels face falling prices

UK hotels face falling prices

New data showing the scale of the battle facing UK hotels where average room rates will fall back to 2005 levels over the next 12 months and the industry will not move into recovery mode until late next year.

A new reports from PricewaterhouseCoopers forecasts that the average room rate (ARR) will fall by 8.1 per cent to £77.69 a night in 2009, down from £84.53 last year – the biggest drop since 2002, when rates fell by almost 6 per cent.

Robert Milburn, PwC’s UK hospitality and leisure leader, said: “While domestic and overseas leisure tourism has been a tonic for UK hotels, the stark absence of corporate travel has left the sector severely weakened.
“Overseas visits are down 9% and air travel is expected to contract further, making the return of the business and conference markets critical for a full recovery.”

“We last saw a room rate fall of this magnitude (8.1% in 2009) in 2002 when rates fell almost 6%.

“While rate declines will slow at last, economic and travel fundamentals remain weak and despite accelerating cost cutting programmes, the evidence points to more savage trading at the end of the year.
“Rate declines will ease in 2010 but we foresee no revPAR growth in any quarter over the year.”

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PwC predicts that revPAR (revenue per available room) will fall by 12.1% this year and slow to a 2.4% drop in 2010.

However according to a survey by an accommodation booking website LateRooms.com, Britain’s leading holiday destinations saw visitor numbers rise by up to four times in August compared with the same month last year.

On a worldwide scale the picture is similar with the average price of a hotel room falling by 17 percent in the first six months of 2009, according to the latest Hotel Price Index from Hotels.com.