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Hotels in the UK May Have a Tough Year in 2020

This year might be very challenging for the hospitality industry of the United Kingdom. As Brexit has finally happened, the country may have fewer leisure and business travelers. At the same time, continuous growth in hotel supply increases the competition between different hotels and lowers their revenues.

2019 was already challenging for many destinations across the country. London hotels also didn’t always show substantial growth. However, in December 2019, hotels in London posted positive results even though the occupancy level was actually lower than in December 2018. The demand added 1.1% but the hotel supply added 2.1%, making occupancy fall by 1.0% to 81.2%. The average daily rate (ADR) remained strong: +2.6% to GBP159.48 year-on-year. Thanks to an increase in this metric, the revenue per available room (RevPAR) in December 2019 added 1.5% to GBP129.44. The absolute ADR and RevPAR were the highest results for London hotels in December on record.

As the hotel supply in the UK keeps growing, local hotels may experience trouble with keeping their bookings full. Many hotels are likely to experience declines in occupancy and ADR in 2020. Their performance might recover in 2021 and 2022 when the post-Brexit demand stabilizes. Hotels in London are likely to maintain their high occupancy and rates. The luxury market in the capital looks particularly healthy, and the performance of this segment might soften possible challenging results in other segments.

In order to stay successful, hotels in the UK need to focus on five key ideas. These ideas might become extremely important in the next decade. They need to offer personalized services, try to develop a good and strong relationship with guests, and do not forget about corporate responsibility. Moreover, hotels need to think of new ways of maintaining their profitability and learn how to attract good staff and make them stay.

Recent studies show that loyalty programs attract fewer people these days, so hotels need to reimagine their incentives. Various limitations and a limited number of rewards make people less interested in redeeming loyalty rewards. Hotels need to think of new ways how to interact with their customers. Finally, in order to stay successful in the highly competitive hotel market in the UK, hotels need to diversify their incomes. Roughly 15% to 20% of revenues should come from the food and beverage department.

02.02.2020

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