Hoteliers enjoy summer boost but feel-good factor set to fizzle out in 2023 - says PwC report

Hotel operators have enjoyed stronger-than-expected demand this year but the recovery is set to stall heading into the new year as the cost-of-living crisis bites, a major report today suggests.

Releasing its UK Hotels Forecast, professional services giant PwC said post-pandemic pent up demand meant a successful 2021-22 season for many hoteliers. To date, there has been a stronger demand for rooms in 2022 than expected but that trend is expected to change in 2023 given the rising operational costs impacting all leisure sectors, the report warns.

Inflation, energy costs and rising interest rates remain major factors impairing the industry’s recovery, in addition to staffing shortages and supply chain disruption. Consumer confidence also continues to be hit by the cost of living crisis, PwC noted.

In a consumer survey conducted by the firm last month, 21 per cent of people who expect to cut back on holiday spending say they will switch to the UK instead of going abroad. Additionally, 17 per cent say they plan to take fewer shorter breaks with 22 per cent saying they will economise on their accommodation options.

These challenging conditions for UK hoteliers come on the back of stronger-than-expected growth in 2021-2022. Returning international tourism helped London perform better than expected across key areas such as occupancy, average daily rate (ADR) and revenue per available room (RevPAR). PwC said the “UK regions” also largely outperformed the previously forecasted scenario for ADR and RevPAR, although occupancy was hit by a softening in demand for staycations during the summer as people headed overseas for guaranteed sunshine.

Samantha Ward, PwC UK hotels leader, said: “After what has been a turbulent few years for the hotel industry, we are now finding a clearer picture of the new normal in the midst of economic uncertainty. Hotels need to get back to basics with a clear cut strategy that will allow them to emerge stronger and more resilient for the future. The latest disruption adds a new dimension to running costs but with the right management strategy, hotels can still perform at a consistent rate with many consumers still willing to experience all the sector has to offer.”

According to the study, demand for domestic corporate events and conferences that the regions typically benefit from is set to remain flat. However, key players such as Edinburgh will continue to benefit from international tourism. Events such as the 2023 Eurovision song contest and the UCI Cycling World Championships will boost cities such as Liverpool and Glasgow in May and August respectively, PwC added.

Stephen Broome, PwC UK lead hotel consultant, noted: “Just when recovery appeared to be stabilising, UK hoteliers will once again need to demonstrate the same strong resolve and ingenuity to overcome the headwinds of inflation, energy costs and staff shortages that threaten to derail recovery in 2023. There is a world of opportunity for hoteliers with the number of major events happening across the UK throughout 2023. From corporate stays to concerts and a coronation, there is an unprecedented occasion to show the best of the market on the global stage.”