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London Q2 Updates

London hotel market performance in Q2 2015 - a continued trend of positive growth

At first glance, London’s hotel performance during the first half of 2015 reflects a decline with June year-to-date (YTD) occupancy decreasing by -0.8% to 79.7%, Average Daily Rate (ADR) growing by just 0.5% to £136.66 and overall Revenue Per Available Room (RevPAR) declining by -0.3% to £108.89. However, once foreign exchange movements, demand growth and the effects of strong 2014 performance are taken into consideration, the city is displaying a continued trend of positive growth.

Looking back at 2014, key metrics for London’s hotel industry all performed at higher levels compared to the average results of 2013, except for the first quarter during which occupancy, ADR and RevPAR were respectively 8.8%, 8.6% and 16.7% lower. Driven by higher occupancy and higher ADR, average RevPAR of the last 3 quarters was 9.5% above the average level of 2013, primarily as a result of one-off and biennial events held by the city such as: HOTELYMPIA in April, Farnborough Air Show in July and 3 large medical congresses in September.

Although the first quarter of 2015 witnessed significant drops in the results of all key metrics compared to the average results of 2013, the market returned to the same position before the substantial growth in 2014 had taken place, with its occupancy declining by -8.8% to 75.2%, ADR declining by -6.9% to £127.53 and RevPAR declining by -15.2% to £95.87. The performance results grew quickly in Q2 2015 to reach 84.1% for occupancy, £144.67 for ADR and £121.65 for RevPAR, all of which were roughly the same high levels as of Q2 2014.

Occ, ADR & RevPAR Indexing

Total 2013 – Q2 2015 YTD (indexed to 2013)

In comparison to supply, which has been growing by +3.3% for the June YTD 2015, demand has been growing at a slower rate of +2.6% during the same period, which is thought to be influenced by this year’s currency movements. According to Tourism Economics, the weakening British-Pound-to-US-Dollar exchange rate means price competitiveness, and thus more US inbound travellers to London. However, the weakening of Euro against British Pound leads to more affordable outbound travel, which is expected to result in fewer domestic trips. Despite this pressure, demand has been growing faster in Q2 2015 (+1.9%) than the same period in 2014 (+1.1%). Considering also the strong supply growth reflected in a total of 5,926 hotel rooms becoming available in the past 18 months, the decrease in June YTD 2015 occupancy was not a major drawback. 

London Supply & Demand

Supply & Demand % Change, 2012- Q2 2015

In comparison to the average YTD figures of 2010-2015 (excluding 2012 because of the Olympics), occupancy rates in Q2 2015 were 0.6% lower, which may have been a result of slower growth in demand compared to supply. Nonetheless, ADR and RevPAR were respectively 3.8% and 3.2% higher, reflecting a positive growth trend for the London hotel industry.