The hotel advisory company predicts London will experience at least a 10% drop in revenue per available room (revPAR) this year, followed by a further 0.5% dip in 2010.
Elsewhere in the UK, revPAR is expected to decline by 8% in 2009 and a further 2% in 2010.
The figures are based on the assumption that the UK economy will contract by 1.7% in 2009 and grow by 0.2% in 2010.
TRI’s report uses preliminary data from Eurostar for December 2008 and January 2009, which show a 15% year-on-year increase in London arrivals.
Much of the increase is in the leisure market, which does not command high room rates, leading to TRI’s forecast of a 10% decline in the capital's revPAR.
If corporate volumes disappear in even greater numbers as a result of a deeper recession and tourism inflows fall further than projected, then London may experience an 18% revPAR decline in 2009, while elsewhere in the UK revPAR would fall by 14%.
Looking ahead to 2010, if recession continues, with a further 1% fall in GDP, then provincial revPAR would drop by 3.5%, according to TRI.
London hoteliers, however, will have the opportunity to stabilise average room rates at the end of 2009 and may lose a minor level of volume, leaving revPAR in 2010 only 0.5% behind 2009.
On the other hand, if the UK is still in recession, the downside scenario sees London losing a further 3% in revPAR.
TRI managing director Jonathan Langston said: ‘It is our prediction that despite the coming heavy falls in revPAR, UK hotels will maintain profit conversion at a higher level than they did in the early 1990s.
‘UK hotels are better prepared for recessionary times than they were in 1991, due to a combination of structural reforms to cost bases during the intervening years and far greater access to markets through today’s enabling technologies.’
See also:
Hotels hike rates despite falling demand (30/01/09)
Fourth quarter slowdown hits hotel profits (28/01/09)
Tough November for European hotels (24/12/08)
Corporate cutbacks hit UK hotels (23/12/08)
Demand still falling at European hotels (28/11/08)
Hotels feeling effect of economic downturn (27/11/08)