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Average room rates in London will fall 2 percent in 2011
even though they rocketed by 15.6 percent in the third quarter of 2010,
Deloitte's hospitality consulting division said on Monday.
The prediction, which is for all sectors of the hotel
market, paints a different picture to the forecasts of travel management
companies that are more specific to the corporate sector. Last month, Egencia
tipped average daily rate to rise 1 percent in London in 2011, but BCD Travel
consulting division Advito told BTN
it expects an increase of 7 percent in the U.K. capital.
According to Deloitte, taking its figures from partner STR
Global, London enjoyed an exceptionally strong third quarter because of a rise
in occupancy from 84.8 percent to 87.9 percent. It attributed the high
occupancy to the two-week Farnborough Air Show and an increase in leisure
visitors from the Middle East. Deloitte expects London to prosper in the fourth
quarter as well, but believes room rate will fall 2 percent in 2011 because of
an anticipated 3.2 percent decline in occupancy.
"There are clearly a number of challenges for hoteliers
in 2011, including it being a non-Farnborough year, the year before the
Olympics and the supply of luxury hotels in the capital expanding with the
reopening of The Savoy and the Four Seasons," said Deloitte hospitality
managing partner Marvin Rust. Other factors that will contribute to a decline
in demand will be job cuts in the public sector and an increase in the United
Kingdom's rate of value-added tax from 17.5 percent to 20 percent on Jan. 4,
Advito vice president Bob Brindley told BTN he expects clients to pay significantly more in London in 2011
because of strong underlying demand, but also because travel managers did a
good job of holding down rates in the U.K. capital in 2010.
"Our 2010 data is from our corporate client base, and
they have benefited in 2010 from the negotiated rates that were negotiated at
the end of 2009," he said. "Therefore, we are seeing a smaller
increase in ADR in 2010 than may be seen in the general market. We expect the
negotiated rate environment to be more challenging for 2011 because of the
increase in ADR in 2010."
However, Brindley was not convinced by Deloitte's assumption
that occupancy will fall in London in 2011. "Corporate demand has been
improving and I don't see a big change in that in 2011," he said. "The
ADR increase will be lower than in New York, which will be in double digits
even though it has the same demand growth as London, but London's ADR rate
growth will still be on the high end for Europe."
Figures from STR for the rest of the United Kingdom showed
occupancy rise from 70.7 percent to 74.9 percent and average room rate climb
4.5 percent to £65. Deloitte forecasts both occupancy and room rate in the
regions to climb again next year.