UK hotel industry heading towards uncertain 2022, according to PwC

Insight Comment It's really difficult to predict just which way things are going to go in 2022. On the one hand, vaccines have helped curb the spread and severity of Covid-19 itself but the knock-on effects of such a seismic event are going to be felt for years.

UK hotel trading is unlikely to return to pre-pandemic levels by the end of 2022, according to new research from PwC.

The prediction forms part of the professional service firm’s UK Hotels Forecast 2021-2022 analysis into market conditions for hotels over the next 12 months. The forecast for occupancy rates by the end of 2022, is between 70% and 90% of pre-pandemic levels in London. Meanwhile in the regions, the forecast is even higher at between 87% and 96% of pre-pandemic levels. 

The speed of recovery will be the major issue in 2022, but will be driven by factors outside of the industry’s control, such as:

• leisure tourism
• business travel
• events

However, a difficult start to 2022 is widely expected, because of:

• end of the majority of government financial support
• rent and tax bills due
• labour shortages
• inflation

Outlook for London

• London is expected to improve under a moderate recovery. 
• The Average Daily Rate (ADR) will recover to £112.26 in 2022, an increase of £27.78 since 2021. 
• This drives an overall revenue per available room (RevPAR) of £63.69 in 2022.  

Outlook for the regions

• Mixed fortunes
• Overall staycation demand to be similar to the summer of 2021 but be more evenly spread throughout the year.  
• High occupancy rates will help regional hoteliers raise their ADR and a moderate recovery could see it reach £67.05 in 2022, up from £61.59 in 2021. 
• RevPAR could also increase to £42.36 in the regions. 

What They Said

Sam Ward, UK hotels leader at PwC: “The hotel sector recovery has a long way to go. The speed of recovery in the capital is likely to be dependent on international tourism and the speed at which business travel returns as markets lift their own restrictions on citizens travelling to the UK.

“Hotels must continue to innovate and adapt to the markets available to them. Many businesses have publicly stated their ambitions to cut business travel even as restrictions are lifted. Hotels that previously focussed on the business market should think about how to capture domestic tourism, looking at this as a real opportunity and, as it returns, the international tourism market.

“In what could be described as a perfect storm, a raft of operational cost increases coincide with the increase in the rate of VAT next April. The ability for hoteliers to endure these costs and preserve profitability, will present a challenge in markets where demand is weaker and more hotel rooms are available.  

“Recovery will not be easy or straightforward, but with the right planning and strategy, hotels across the UK can look forward to significantly better trading over the next 12 months”