PwC: European hotel business to flourish in 2015-2016

05 March 2015

European hoteliers are expected to see higher growth in 2015 and 2016, PwC’s hotel forecast of 20 European cities shows. According to the forecast, this is the result of higher average daily rates combined with higher occupancy rates. For the UK, PwC predicts the highest occupancy levels ever.

Professional services firm PwC recently released its fourth European hotel forecast, titled ‘Room for growth’, featuring 20* of Europe’s most important gateway cities and/or business and tourism centres. The 2015-2016 forecast provides revenue and occupancy predictions for each city. Based on these forecasts and following a “good year for the hotel industry in 2014”, the firm predicts that the improving economic and business travel backdrop will drive growth for the hotel sector in 2015 and 2016. 

According to the business advisory, all of the cities included in the forecast, except Geneva, Zurich and Moscow**, are expected to achieve higher growth in 2015, when looking at revenue per available room (RevPAR).  When looking at 2016, all expect Geneva and Zurich are expected to achieve additional growth. Dublin will see the biggest growth with rates of more than 8%, followed by Madrid (with growth rates of around 5%) and London (expected to see growth of around 4.6%).

Expected growth in RevPAR 2015-2016

Commenting on this projected growth, Liz Hall, Head of Hospitality and Leisure Research at PwC, says: “Growth is being driven by a combination of higher average daily rates (ADR) and occupancy levels. In some countries, higher occupancies reflect a structural shift towards more branded budget hotels as well as access to online distribution channels and greater propensity to travel. In many top performing cities - like London and Paris - which operate at over 80% occupancy, this gives hotels the confidence to raise rates and it’s ADR driving the most growth.”

Occupancy vs. average daily rates

London, Edinburgh and Paris are expected to have the highest occupancies in both 2015 and 2016. And while Dublin, with a 7% growth rate, is expected to see the strongest ADR (€) growth forecasted for 2015 and 2016, the city with the highest ADR is Paris, followed by Geneva and Zurich.

The ADR combined with occupancy rates translate into the highest RevPAR levels for Paris, Geneva, and London. The latter of which is expected to surpass Geneva in 2016. 

RevPAR ranking

Booming business in the UK
When looking at the UK, PwC’s forecasted occupancy rate of 84% for hotels in London will be an increase of 1.6% compared to 2014 and the highest rate in 20 years. The UK regions are also expected to see growth in 2015-2016, albeit not as strong as in 2014, resulting in the highest occupancy rate ever. The consulting firm predicts that with the high occupancy rates, hoteliers will be confident to raise rates upwards raising their RevPAR in both London (4.6%) and the regions (5.4%), to £122 and £51 respectively in 2015. 

UK hotels forecast

Hall concludes: “The hotel sector faces plenty of challenges and geopolitical uncertainties. But we are optimistic in its ability to compete, adapt and succeed; especially now economic fundamentals of rising prosperity and increased globalisation have re-asserted themselves following the financial crisis.”

* The 20 cities are Amsterdam, Barcelona, Belfast, Berlin, Brussels, Dublin, Edinburgh, Frankfurt, Geneva, Lisbon, London, Madrid, Milan, Moscow, Paris, Porto, Prague, Rome, Vienna and Zurich.

** Hotels in Geneva and Zurich are expected to face challenging times in 2015 as a result of the removal of the Swiss Franc cap and Moscow as a result of international sanctions.


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