Hotel operators face "challenging" year ahead

The New Year is "likely to be challenging" for hotel operators due to flat occupancy levels and increasing overheads.

Russell Kett, chairman of HVS London, warns the combination of wages going up, staff shortages, increasing food and utility costs, and the impact of higher property taxes and business rates, as well as a strong pipeline of new hotels, will put pressure on operating margins over the next 12 months.

However, despite little or no occupancy growth, yields are likely to increase slightly with average daily rate (ADR) and rooms revenue per available room (revpar) rising by an anticipated 5% in London and 3% in the regions.

Kett believes that leisure travel for the year ahead will remain strong in the UK, particularly while the pound is relatively weak, although corporate business looks set to be squeezed as companies seek to contain costs.

Likewise, domestic consumer spending could remain somewhat dampened as confidence is still shaken by the UK’s impending exit from the EU. The threat of security concerns in key cities also remains in the background, but has yet to have a material effect on hotel demand.

While there is a deceleration in UK growth, there will still be growth and the outlook for travel into the UK remains positive.

Kett said: “Next year will truly sift the good from the average, particularly in cities with an increasing supply of hotels, such as London. Operators need to maximise revenue from every bit of space and keep a tight control on overheads.”

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