Average daily hotel rates across key UK leisure destinations look to be on a downward trajectory as the cost-of-living crisis may be finally feeding through into pricing.
Following the post-pandemic surge and as restrictions loosened, domestic demand started to shift. Urban destinations rebounded strongly while international trips were back on the cards for many. As of November (latest figures), UK outbound trips totalled around 66 million, according to the ONS, equivalent to 75% of trips made in 2019.
With demand shifting, pricing has come under pressure. Since last summer, hoteliers in key leisure destinations have lost some pricing power as competition increased and the cost-of-living squeeze may be driving consumers to be more price conscious.
Destinations that saw some of the largest increases to rate in 2021 are now experiencing some repricing. Bournemouth stands out due to its sharp growth with rates increasing by 40% in the 12 months to February 2022, while over the past 12 months prices have trended in the opposite direction, declining by 12%, as trading also begins to normalise. Similarly, Harrogate which experienced a 24% rate uplift on pre-pandemic levels as pent-up demand flocked to domestic leisure destinations prior to the removal of all restrictions, has since seen a price correction, with rates down 13% year on year in the twelve months to February.
Outliers, like Glasgow’s city centre, have been negatively affected by other factors, however. Rate growth in 2022 was largely influenced by the COP26 Climate Conference where hoteliers could charge a significant premium, bolstering performance overall. The absence of such an event last year affected pricing, while significant additional supply in the city centre over the past two years is likely adding pressure too, especially during lower periods of demand.
While rate growth seems to be decelerating in these markets, prices remain ahead of 2019 levels, an overall positive. A slowdown in rate growth in domestic leisure-led locations could point to a trend that may hit other markets soon, however. Urban destinations that are behind the curve may start experiencing similar pricing patterns in the coming months, especially as occupancy may become more of a focus.