The impact of the increase in the National Living Wage (NLW) on labour costs in 2024 is forecast to hit UK hotels, particularly in the regions. This will put the spotlight once again on the need for top line growth and smarter cost control to maintain or improve profitability.
The rate of growth in occupancy, average daily rate and revenue per available room, while strong, continued to decelerate as the market moves on a path towards stabilization. Lower-priced hotels benefited from the customer's level of rate fatigue being felt in the market, with ADR growth levels for midscale properties triple that of higher-priced hotels in Q4. 2023 RevPAR experienced a year-over-year increase of 16.5 percent, with Q3 seeing an increase of 13.6 percent and Q4 being up 11.5 percent.
CEOs are determined to drive transformative change in the face of persistent challenges and growth concerns, with a focus on their own catalytic role, investments in necessary skills and technology, and the rise of generative AI (GenAI).
While continued optimism in the strength of the UK staycation and business travel is driving record levels of hotel development, we expect this to be met by waning demand. The PwC UK Hotels Forecast 2023-2024 shows this increase in supply comes as the post-Covid 'revenge travel' bounce fades, inflationary pressures reduce and the UK economy sits firmly in the doldrums.
Room rate growth had played a significant role in the initial recovery for US hotels but softened significantly in Q2 before falling to below inflationary growth levels in Q3. That said, ADR growth is expected to begin to increase and slightly exceed a declining inflation level beginning in Q4 and into next year.
The right combination of technology investments can improve guest experience, boost profitability and equip the industry for growth
Only 17% of executives strongly agree that there will be a recession in the next six months - As executives see external risks ease, they are channeling their investments into transformation, technology and talent
The rate of growth in occupancy, average daily rate and revenue per available room decelerated considerably in Q2, with room rate fatigue effecting growth in the higher-priced hotel categories.
The highest consumer sentiment we’ve seen in 18 months strongly suggests we’re nearly back to normal. There’s improvement across all demographics, with the variance between age groups closing and less affluent socioeconomic groups catching up. Finances have stabilised, and some groups even have disposable income to spend. While inflation remains the biggest factor affecting finances, fewer people are cutting back and spending intentions have consistently improved since June 2022. We explore what these findings look like for consumer businesses.
After a stronger-than-forecast performance for 2022, continued inflationary headwinds across energy, food and beverages (F&B) and payroll remain critical factors impairing the UK hotel industry’s recovery.