INTERNATIONAL REPORT—Set against a backdrop of continuing global, European and U.K. political and economic uncertainty, PwC forecasts that global economic growth will slow in 2019; trade conflicts will deepen, generating uncertainty for businesses and policy makers and that labor markets will continue to tighten.
In the Eurozone and U.K., uncertainty relating to global trade tensions and Brexit are also expected to take a toll on economic growth, according to PwC’s latest forecast update for U.K. hotels for 2019 and 2020.
Among the report’s findings:
Despite continued macro and geopolitical uncertainty, international leisure travel held up relatively well in 2018, supported by the weak pound. Operators we have spoken to expect the pound to remain advantageous against the euro, at least until the fall season.
However, some reports suggest a wait-and-see attitude is developing among potential travelers to the U.K., especially those from Europe. At the same time high levels of new supply continue to open in London and across many U.K. cities.
On balance, despite reasonably resilient demand growth a 4% increase in new supply in London is forecast and a 3.3% increase in Provincial supply growth in 2019, will put pressure on occupancy rates and will impact RevPAR growth.
ADR gains should be enough to drive reasonable 1.7% RevPAR growth in 2019, and 1.4% growth in 2020. Take out inflation and it’s in effect not really growth. So far in 2019, growth has remained strong, albeit a deceleration on late 2018 levels of growth.
The regions are expected to reflect a more difficult domestic economic outlook and the impact of new supply. We forecast only modest RevPAR advances in 2019 and 2020, of 0.4% and 0.8% respectively. In January 2019, Provincial performance already looked softer.
Despite the continued Brexit uncertainty in the market, we have seen a greater level of hotel deals during 2018, with total deal volume reaching c. £6.6 billion, a 36% increase on the total deal volume in 2017. This makes the deal volume in 2018 the second highest ever after 2015, which saw record levels of c. £9.3 billion. There is an expectation for continued inward investment from Europe and the Far East moving away from majority North America and UK investors looking for good opportunities and strong returns, especially given relatively low value of the pound.