as good as it gets? hall... · 2017. 11. 6. · pwc outlook for global economy in 2017 pwc august...
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www.pwc.co.uk/hospitality-leisure
UK hotels forecast 2018As good as it gets?
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PwC
AgendaScene setting
➢ Global and UK economic outlook
➢ Travel trends
➢ Recent hotel trading
Latest PwC hotels forecast
2
September 2017As good as it gets
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Global and UK economic outlook
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PwC
Global growth picking up in 2017 and 2018% per annum change in world real GDP and consumer prices
Source: IMF World Economic Outlook Update, July 2017
-1
0
1
2
3
4
5
6
7
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
GDP growth Inflation 1980-2010 GDP growth trend
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PwC
Outlook for global economy in 2017
PwC August 2017 Global Economy Watch
Russia
Germany
UK
US
Brazil
India
Spain
Key
Canada
Mexico
South Africa
Australia
Japan
Italy
Greece
Ireland
France
2.0
2.1
1.7
0.4
1.6
3.8
1.5
1.8
1.3
0.8
7.3
1.2
2.7
6.6
1.2
1.3
x.x = GDP growth in 2017
China
3.0
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PwC
The UK has slipped into the economic slow laneEconomic scenarios for UK post-Brexit
Sources: ONS and PwC projections, updated for most recent data
95
100
105
110
115
120
125
130
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Pre-Brexit Central scenario (FTA) Downside (WTO) Current forecast
Estimated impact on GDP by 2020 vs Remain
scenario = -3-5.5%; Current projection = -2.5%
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PwC
UK business investment fell last year% p.a. change in UK business investment in real terms*
Source: Office for National Statistics *total fixed capital spending pre-1997
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%Investment 1970-2016 average
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PwC
UK inflation has picked up sharply% annual change in consumer prices index (CPI)
Source: Office for National Statistics
-1
0
1
2
3
4
5
6
2005JAN
2006JAN
2007JAN
2008JAN
2009JAN
2010JAN
2011JAN
2012JAN
2013JAN
2014JAN
2015JAN
2016JAN
2017JAN
CPI inflation 2005-13 average 2014-16 average
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… as a weak pound has squeezed consumersUK effective exchange rate, Jan 2005=100
Source: Bank of England
70
80
90
100
110
120
130
EER 1990-2008 Ave Ave since 2009
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PwC
The global economy in 2018
PwC August 2017 Global Economy Watch
Russia
Germany
UK
US
Brazil
India
Spain
Key
Canada
Mexico
South Africa
Australia
Japan
Italy
Greece
Ireland
France
2.1
2.2
2.0
1.2
1.6
3.3
1.4
1.7
1.0
1.0
7.5
2.0
2.8
6.2
0.7
1.4
x.x = GDP growth in 2018
China
2.3
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PwC
UK faces slower growth as consumers are squeezed% per annum change in GDP and consumer spending
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
GDP Consumer spending
Source: ONS and PwC forecasts
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PwC
Implications for the hotel industry
➢UK economic growth is weakening, driven by higher inflation, consumer squeeze and investment uncertainty
➢But global economy remains resilient – with continental Europe picking up strongly
➢Healthy global growth and a competitive pound has boosted UK inbound leisure tourism
➢Business travel to UK less buoyant – may reflect impact of
Brexit uncertainty
➢Looking ahead to 2018, exchange rate boost to travel
growth likely to fade and Brexit uncertainty and consumer slowdown will have a bigger impact
➢Global economy likely to remain robust in 2018, which
should support modest growth in hotels industry
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Travel outlook
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PwC
Inbound travel at record levels
But, divergence between segments
As good as it gets?
• Bonanza for inbound holidays+ 20%
• Inbound business - 3%
• Groups .. and more groups
• Conferences and meetings
• Terror threat
• High hopes for staycations
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Demand and supply trends
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PwC
Strong London hotel trading in 2017Heating up or cooling down?
As good as it gets?
(15)
(10)
(5)
-
5
10
15
Occupancy ADR
RevPAR
Source: PwC STR
% c
hang
e y
-o-y
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PwC
Positive regional hotel trading in 2017Steady as she goes
As good as it gets?
(2)
-
2
4
6
8
10
Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17
% c
ha
ng
e y
-o-y
Occupancy ADR RevPAR
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PwC
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2011 2012 2013 2014 2015 2016 2017F 2018F
London Regions
Supply snapshot The heat is on, especially in London
S ource: AMPM August 2017
Average supply growth 2011-2016
LondonProvinces
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Latest PwC hotel forecasts
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PwC
Key 2018 forecast assumptions
• Positive global and EU economic growth
• Deceleration in UK GDP growth
• Positive travel outlook but stimulus of weak pound diminishes
• Leisure travel benefits most
• Brexit uncertainty impacts business travel and domestic consumer spend
• Supply spike impact, especially London
• Security concerns may dampen bookings
Slide 20
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London forecast 2017 and 2018
Still a reasonably strong outlook
Facing the future September 2016
Source: PwC
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Provinces forecast 2017 and 2018
Further growth ahead
As good as it gets? September 2017
Source: PwC
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As good as it gets?
…A broadly positive growth outlook but we don’t expect the
growth in 2018, to match 2017…
but a more uncertain trading
backdrop
• Sterling related price inflation
• Labour exodus
• Rise in NLW; higher rents and business rates
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