After Brexit, What Will 2017 Bring for London Hotels?

The Future of London’s Hotels

So how does London compare? And what will be the impact of the Brexit vote? The STR and Tourism Economics data had predicted recovery in 2017 for London’s hotel market. Their data predicted this based on increased domestic demand, growth in GDP, an increase in the consumer price index and renewed investments activity.

STR analysts had predicted that the mid-scale and economy segments would see the highest growth in demand for the rest of 2016 and beyond, despite increased competition in this field. According to STR, this is because increasingly price-conscious travellers are expected to continue to opt for these classes over the luxury segment.

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Meanwhile, the luxury segment, which saw its strongest ADR rate increase ever in 2015, is predicted to see slower growth in 2017 and beyond. STR predicts this decline due to increase in supply and slowing demand from key feeder markets such as the Middle East, China and South America.

However, with the U.K. now preparing to exit the E.U., this forecast is unlikely to hold true.

London and Edinburgh are expected to be the markets most affected, due to their standing in the financial sector. A decline in real estate values could also have an impact on hotel owners.

Michael McCartan, Managing Director of the EMEA region for Duetto, warned hotel revenue managers to be cautious following Britain’s vote to leave.

“The international perception of the U.K. as an open economy and society will be damaged,” he said. “The U.K. will be in a state of limbo as trade deals are renegotiated. Business leaders and investors won’t risk the wait, and investment will be diverted to other gateway cities such as Dublin, Amsterdam and Barcelona. This will precipitate an economic downturn and a readjustment in hotel revenues. The economic downturn will affect the disposable income of U.K. citizens, and this will impact domestic demand for hotels, especially in the luxury sector.

“However,” McCartan added, “a cut in the exchange rate for Sterling will make the U.K. a more attractive destination for foreign leisure visitors.”

As the U.K. settles into its new independence, hotels are advised to utilise forward-looking data sets to understand market dynamics, define a company-wide Revenue Strategy and avoid taking knee jerk reactions to rates. If ever there was an argument for breaking down departmental silos and working together, now is the time to do so.

About the Author
Sarah McCay is contributing editor for Duetto in Europe. Duetto delivers revenue strategy solutions to the world’s leading hotels and casinos. This article originally appeared on Duetto’s blog.

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