Uncertainty to stall growth across region’s hotel sector

PwC’s latest hotels forecasts predicts trading growth to flatten across the West Midlands in the year ahead due to economic uncertainty, weak business travel demand and an influx of new rooms scheduled to open across the country.

Overall occupancy levels in the regions have been averaging 76% since 2015 and are forecast to remain around this level for the next year with -0.3% growth for 2018 and no growth forecast for 2019.

Hoteliers in Birmingham have seen a positive level of occupancy growth (3%) over the last twelve months compared to Coventry which has seen a very slight fall in levels (-0.5%).

Regionally the Average Daily Rate (ADR) growth is also forecast to slow with an anticipated 1.3% increase for 2018 taking ADR to £72 and a further 1.2% in 2019 to £73.

Revenue per available room (RevPAR) is forecast to see a 1% uplift and a further 1.2% in 2019 taking it to £55, up from £54 in 2017.

Whilst Birmingham has seen an increase in its RevPAR of 4.8% it is performing slightly below the regional average at £51. Similarly Coventry’s figures show an increase of 3.4% in ADR and an increase of 3% in RevPAR.

In general new hotel development activity remains strong across the regions. Newer brands include Marriott’s budget lifestyle brand, Moxy. A new 224 bedroom Moxy hotel is set to launch at the National Exhibition Centre in Solihull in 2020.

Liz Hall, head of hospitality and leisure research at PwC, said: “2017 was a hard act to follow for hotel trading, in terms of growth and 2018 has been held back by uncertainty, slower economic growth, significant supply additions and reported stuttering business travel. This is despite the weak pound buoying leisure travel, the Royal Wedding and the International Farnborough Air Show effect.

“For a sector heavily reliant on people to deliver its products and services, the shortfall in availability of EU nationals remains a concern for hotels and the weak pound has pushed up the costs of retaining staff and importing goods within the sector.

“Following a number of years of strong revenue growth when there was not the imperative to focus on costs, prudent operators and owners need to adopt a stringent approach to operating costs growth in 2019 to preserve profitability.”