Published on 13 December 2012

The Challenge for Luxury Hotels in 2013

The UK’s luxury hotel sector has experienced a period of rapid growth, fuelled in part by the major events of 2012; the Olympics, Diamond Jubilee and Royal Wedding to name just a few.

But with a quiet year ahead in 2013, has the luxury sector expanded too fast?

New guest room supply in 2012 outperformed any year in the last decade, and there are many more in the hotel pipeline. PwC report a 33% increase in luxury room supply between the successful bid to host the Games was announced in 2005 and the end of this year.

The increase comprises nearly 4,000 new luxury rooms – and 5 star hotels now account for around 12% of London’s rooms (some 14,000 rooms).

“Looking at recent performance, luxury hoteliers tell us: so far, so good,” explained PwC head of hospitality and leisure research, Liz Hall. “In fact, luxury has outperformed expectations in the ten months to October and is holding up well, especially given all the extra supply.”

Looking to 2013

Against strong performance in 2012, many feel unconfident about 2013. A weak economic and travel environment, a fight for market share and more new rooms on the market will make 2013 a challenging year.

After an “Olympic year”, the 2013 events calendar looks empty and many are asking where the demand will come from?

Will the Olympic legacy drive business for high end hoteliers? Certainly, the global awareness of the capital as a destination and the ongoing improvements in infrastructure are encouraging. Could emerging markets also provide demand in 2013?

“London’s luxury hotel sector has a challenge on its hands,” concluded Hall. “But the city is a global gateway with increased global awareness after the 2012 Games and continues to compete well with the other major cities in the world when it comes to top end hotels.”

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