London hotel trading for the six months to June painted a mixed picture, with an ADR gain of 1.8% (to £154) compared to the same period last year, according to benchmarking data analysed by PwC. However, decelerating growth drove an occupancy slip of 1.2% giving only a marginal RevPAR gain for the six months. This is in stark contrast to the 12.7% RevPAR gain at the half way point last year.
The data from STR Global shows that June was a particularly disappointing month for London albeit against record comparables in 2011. The month saw occupancy levels fall by 8.4% to 82%, against an average of 90% in June 2011.
Commenting on London hotel performance, Liz Hall, head of hospitality and leisure research at PwC, said:
“Weekly trends data for July have shown continuing declines in key metrics although there are signs of a welcome uptick in the last week of the month.
"There are a number of possible reasons for the recent drop in hotel performance: the deteriorating economic situation, extensive new supply in the Capital, the Jubilee holiday which saw corporate travel disrupted by the two bank holidays, a pre London Games dip, and difficult occupancy comparables have all taken their toll. The earlier start to Ramadan compared to 2011 may also be a factor.”
Looking ahead to the second half of 2012, Liz Hall, head of hospitality and leisure research at PwC, added:
"Just how the second half of 2012 turns out will depend on how London fares during the Games and of course the economic outlook. We can only hope there will be some pent up demand post Games as the many business travellers and visitors who had avoided the city return.
“PwC has consistently warned against the inflated expectations of some hoteliers for a London Games bonanza, but the dawning reality after this first week’s events is that London has been much quieter than even we expected.
“While we still expect to see some occupancy growth, overall performance in the third quarter will be dictated by the extent to which hoteliers are able to hold on to their planned rate increases during the Games.”
London is consistently ranked as one of the top two cities in the world and this is unlikely to change. Looking beyond 2012 there will also be a powerful tourism legacy from the London Games – with high quality visitor accommodation.
The challenge for London's hoteliers after the Games will be how to differentiate themselves in such a competitive market off the back of the feel good factor.
Liz Hall, head of hospitality and leisure research at PwC, concluded:
"Will we see a post Games dip or will the media spotlight stimulate new visitors to the Capital? In the short term, supply issues could impact trading and the East of London particularly could experience a difficult period."
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