London hotels set to hit summer price peak, but it is simply a case of supply and demand

Basic economics tells us that when the supply for a product reduces and demand for that same product increases, then its cost will rise. It is no surprise to learn then that passengers caught up in the British Airways (BA) flight cancellation saga over the past UK bank holiday weekend (May 27-29, 2017) were forced to pay hugely escalated prices for hotel rooms around the airline’s main hub at Heathrow Airport.

There were reports on social media of passengers being quoted £800 for a single room at a two-star establishment, while the Blue Swan Daily editorial team saw some smaller facilities in locations close to the London international airport advertising final rooms for the night of May 27, 2017 at over £1,000 during the same afternoon. This is far beyond the £200 per day per room rate described as a reasonable expense described by BA for customers to reimburse.

In times of crisis it is inevitable the costs of goods will rise, but you can also partially prepare for higher costs, for example school holidays, sporting and music events etc. And it is just these factors that have led global data benchmarking, analytics and marketplace insight provider STR to predict that hotel performance in the UK capital could reach record actual levels between late June and mid-July this year.

Following a record-breaking Q1, and in anticipation of several summer events that are likely to boost hotel demand, STR and Tourism Economics have lifted their 2017 market forecast for London, England.

“London hotels had an exceptional start to the year,” says Michele Pasqui, a forecast analyst at STR. “The results we’ve seen thus far have in part been a rebound from a weak first half 2016, but more important has been the increased international tourism to the UK due to the pound devaluation.”

This strong performance is expected to continue through the remainder of 2017, and the forecast projects a 6% increase in demand for the year, which would be the market’s highest rate of growth since 2013.

“Along with strong demand, inflation is also picking up this year, and we expect London’s average daily rates to increase by around 5% for the full year, which should result in one of the market’s strongest performances for the last five years,” adds Pasqui.

This strong baseline performance will be impacted by a seasonal peak from the end of June as a result of events in the UK capital as overlapping concert and sporting calendar dates coincide with an expected influx of tourists from the Middle East after the Eid holiday ends on June 26, 2017.

On June 28, 2017 famous singer Adele will kick off a four-night concert series at Wembley Stadium which concludes her Live 2017 tour. This has already brought significant hotel business for many international markets and all four London nights are sold out, with STR analysts projecting that rates for hotels within reasonable access to Wembley Stadium expected to spike.

Historical data from STR shows that previous major concerts at Wembley Stadium has delivered more than a 6.2% rise in average room rates, increasing by almost a fifth when Coldplay performed at the iconic venue.

  • Beyoncé (2 July 2016): £152 (6.2% higher than the 2016 yearly average)
  • Coldplay (15 June 2016): £170 (18.5% higher than the 2016 yearly average)
  • Ed Sheeran (11 July 2015): £153 (6.4% higher than the 2016 yearly average)
  • AC/DC (4 July 2015): £155 (8.4% higher than the yearly 2015 average)

The day following Adele’s final show, Wimbledon 2017 begins, positioning the market for a 19-day period that is expected to bring both high occupancy levels and average daily rate. During the two-week tennis championship tournament which runs from July 3, 2017 to July 17, 2017, London’s hotel rates are routinely much higher than the market’s June through August average. For Wimbledon 2016 (June 27, 2016 to July 10, 2016), London’s average daily rate was £159, a 6.4% rise on London’s three-month summer average in 2016 (£149), according to STR.