The UK and other western economies are going through a prolonged period of structural adjustment and relatively low growth and volatility is likely to persist through the mid-2010s. Against this disappointing backdrop, the London hotel market has demonstrated remarkable resilience. Revenue per room dipped by 5% in 2009, but has since rebounded by 25% to reach a record high. This has been helped by one-off events such as the Olympics,
but it also reveals a more fundamental strength: that London's status as one of leading global cities means it can attract people from all around the world, including those from emerging markets whose economies continue to proper. We do expect a weaker hotel market in 2013, as the inevitable Olympic hangover kicks in. The surge in new supply during 2012 and 2013 may bring down occupancy but we do not expect these temporary factors to hold London back for long.
In the UK regions, the picture is different. Here demand is more dependent on the domestic economy, which has been squeezed by high inflation and the aftermath of the financial crisis. Revenue per room is still 10% below its 2007 level. Despite near 70% occupancy rates, hoteliers have been unable to pass price increases through the market. We expect revenue per room and rates to remain broadly flat in 2013, as they have since 2009.