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Hotel market outlook - Quarter 2 2010


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Background

Hotel market outlook capitalises on Deloitte’s extensive knowledge of the hospitality industry, enabling us to provide commentary and analysis on future trends, as predicted by the e-forecasting model, as well as historic ones. The outlook is produced using data from a consistent sample of hotels collected by STR Global Limited. This data is input into an econometric model developed by the independent economic research firm, e-forecasting Inc, to produce hotel performance outlooks for the London and Regional UK markets.

Key findings - the model

  • The immediate outlook for hotels in London looks assured, with strong double-digit revPAR growth expected for Q3 following a successful Farnborough Air Show this summer. The outlook for Q4 however has changed considerably since the last outlook with revPAR expected to fall into negative territory – a very different outlook to the 4.1% revPAR growth predicted only three months ago.
  • For the year-end 2010 outlook, the model still expects to report strong revPAR growth, up 6.5%, however hoteliers expecting much of the same for 2011, disappointment may be in prospect. The model is now predicting a 5.2% fall in revPAR for the year as both occupancy and average room rates head back into negative territory.
  • The outlook for the remainder of 2010 has also been revised downwards for hotels in Regional UK, however average room rates are due to make a turning point in Q3, rising 1.1% to £65.91. In Q4, growth is expected to be strong in both occupancy and average room rates (against weak comparables) resulting in revPAR growth of 7.8% for the quarter.

Authors comment

Occupancy declines from August for London are wide off the mark. We still expect revPAR to close the year with increases close to 10%. 2011 though will see a number of negative factors combine to provide a much tougher environment for hoteliers. For the Regions any surprise may well be on the upside for 2010 and 2011 looks a fair target.

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