The Brexit effect on business travel

by Business Travel iQ | 20 September 2018

PwC says uncertainty over the UK’s exit from the European Union will keep a cap on hotel rates

Protracted negotiations around Brexit are not helping business travel to the UK, according to PwC.

In this week’s UK Hotels forecast, the company said that this was feeding through into its rate forecasts for the year ahead. The company expects achieved daily rates (ADRs) in London to rise by 0.8% to £150 in London and by 1.2% to £73 in the provinces.

PwC’s senior economic adviser Dr Andrew Sentance says that since the Brexit vote, the UK has dropped down the growth league. “Business travel to the UK is less buoyant and this may reflect Brexit uncertainty,” he said. “Some aspects of Brexit deal will not be resolved for many years.”

Liz Hall, head of research for Hospitality & Leisure at the company, says that international business travel visits to the UK fell by 4% to 8.8 million in 2017.

The company said, “One of the largest global hotel groups told us that in 2017, they had benefited from financial institutions and government as a result of Brexit activity, but that demand had now slowed down. Ongoing economic and political uncertainty could continue to slow business travel in 2019.”

Christopher Cowdray, CEO of the Dorechester Collection, says that he is not concerned about falling business travel demand and that London will always be popular. “London is a very easy place to do business compared to California or Paris, say.”

Some concerns are feeding through into corporate negotiations.

“Hoteliers we have spoken to already report some resistance to rate increases during the RFP process this year,” it said.

Hotel buyers are expected to benefit from buoyant supply. PwC says that London will get an extra 9,500 rooms in 2018-19 while the regions will see an addition 40,000 and says “demand is not strong enough” to support this growth in supply.

PwC adds that the growth in serviced apartments and sharing economy providers such as Airbnb are also boosting supply.

Occupancies in the UK’s hotels are high – particularly in the regions (76%) – so corporates will be keen to make sure they can get rooms at a reasonable rate.

As buyers head into the RFP season, using Brexit will be a handy strategy to keep rates under control.

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