London hotels have faced the most significant challenges in the face of the pandemic and, unlike previous downturns, their recovery is lagging behind that of the regional hotel market, highlighting their dependence on international travellers. The big question is then, when will these travellers return to London?
Globally international air travel is expected to return to pre-pandemic levels by 2024 with forecasts from Tourism Economics also suggesting that in 2030 passenger numbers could be 34 per cent above 2019. They also suggest that those markets more reliant on short-haul arrivals could see a faster recovery. This is good news for London as close to 60 per cent of London arrivals originate from Europe, suggesting that the city could be one of those markets that could see an earlier recovery.
This faster recovery could be supported by improving travel sentiment among Europeans. In the latest sentiment survey carried out in May by the European Travel Commission over half of all respondents said they plan to travel to another European country in the next six months, a substantial increase on the 6 per cent reported in February.
Recent Heathrow arrival data suggests that we may be starting to see the very early beginnings of this trend. The airport saw two million international arrivals in August, while still significantly down on pre-Covid levels it was the highest monthly arrival figure since the start of the pandemic and the fourth consecutive month that saw an improvement in its 2019 monthly comparator. Similarly, arrivals from the EU reached a post-Covid high of one million in August. This suggests that arrival numbers are moving in the right direction.
This improvement was partially reflected in London hotels’ occupancy data. Historically, there has been a close correlation between Heathrow arrivals and London hotels occupancy (as shown in the chart) with the improvement in arrival numbers also being mirrored in occupancy performance, albeit the widening spread between the two points to a surge in domestic leisure demand over the summer months.
The recent Government announcement relaxing the travel rules for those entering the UK could provide an additional boost to international arrival numbers over the coming months. From 4 October 2021 fully vaccinated travellers from non-red list countries will only need to carry out a test on the second day after arrival in the UK, scrapping the pre-arrival test, effectively simplifying and reducing the cost of travel to the UK.
While the outlook looks positive, it’s important to remember there is still lots of downside risk linked to potential future lockdowns and subsequent tightening of travel restrictions. However, with improvements in traveller sentiment and as the economy continues to open up, we could see arrival numbers continue to move in the right direction, with London hotels set to be a major beneficiary.
Further information
Contact Marie Hickey
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