• Economy to finally hit trading

Trading is finally anticipated to catch up with the deteriorating economy in 2009, according to the latest forecasts by PricewaterhouseCoopers.

The report, entitled "UK hotels: early check-out for good times", predicts that revpar will be a relatively robust 5.2% in London in 2008 but drop to just 1.5% in 2009.

The provinces in will, however, suffer from growth of just 0.5% in 2008 rising to just 1.1% in 2009.

"High but flat occupancies and rising room rates are characteristic of a cycle peak. The current mix of financial and economic events is likely to hasten this cycle along and demand will continue to slow as customers travel and spend less or trade down," said the report.

This gloomy perspective for the UK was further reinforced by a survey by American Express. This found that more than one in three hospitality businesses in the UK are feeling less confident about economic prospects over the next 12 months.

The survey, conducted in April and May through 90 telephone interviews, found that 29% of respondents felt more confident against the 38% that were feeling more confident a year earlier during a similar survey.

Globally, there is also an ongoing deterioration in sentiment among hotel investors. According to the July Hotel Investor Sentiment Survey by Jones Lang LaSalle Hotels, there is currently a flight to quality among investors with strong pricing still being achieved on key assets but softening pricing on secondary assets in riskier locations.

This translated into initial yields in EMEA moving out on average by 40 basis points to 7.4%. For the US, the movement was more dramatic, averaging 70 bp to 8.6%. In Asia there was a contraction of 30 bp to 8.2%.

The transaction market had "slowed considerably on a global basis with the US being most impacted", according to JLL. But certain key countries and regions – France, Germany, Italy and Asia Pacific were named – continue to attract investors.

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