Hotels need a fresh strategy for 2023 - PwC

The recovery of the hotels sector across the UK is set to stall in 2023 due to the impact of rising operational costs, according to a new report.

PwC published its annual UK Hotels Forecast today with insights into the sector across the UK.

To date, there has been a stronger demand for rooms in 2022 than expected but that recovery is set to stall into 2023 given the rising operational costs impacting all leisure sectors.

Inflation, energy costs and rising interest rates remain major factors impairing the industry 's recovery, in addition to staffing shortages and supply chain disruption. Consumer confidence also continues to be hit by the cost-of-living crisis.

In a PwC consumer survey conducted in October 2022, the results showed that people said they will be cutting back on holiday spending, as well as switching to the UK instead of abroad. Additionally, some say they plan to take fewer shorter breaks and economise on their accommodation options.

Birmingham benefits from being the UK 's second largest city and 56 per cent of total overnight visitors come from domestic tourists. With a full calendar of events this year, the local market is already seeing the benefits of the return of group demand during busy conference periods.

Sarah Phillips (pictured), PwC partner and consumer markets leader for the Midlands, said: “The events in Birmingham this year have provided a much-needed boost to hotels and leisure businesses in the city and surrounding areas.

“Over the summer, the Birmingham 2022 Commonwealth Games saw over a million visitors to the region whilst raising the city's profile globally. This was followed by the Tory Party Conference and now the return of the iconic German Market in the run up to Christmas.

“We know that leisure and hospitality businesses were hit hard by the pandemic and the forecast for the last two quarters of the year highlights further challenges. However, with the events that were unique to the region this year, Midlands hoteliers have an opportunity to maximise on the profile of the region.

“That said, energy costs and cost-of-living are having real impacts on businesses across the UK and many will be considering what practical steps they can take to alleviate some of the impending cost pressures. ”

PwC suggests looking at mitigating inflation on costs such as energy costs, staffing and supply chain to find solutions to market recovery. Although hotels will be aided by the Energy Bills Relief Scheme (EBRS), which is currently only stated to last until the end of Q1 of 2023.

PWC states hotels must look to other energy consumption reduction measures such as reducing the room and water temperature in the short term or investing in solar energy measures that will reap longer term benefits.