London Hotel Surge Seen Slowing Price Growth After Games

London hoteliers will probably have slower revenue growth next year as a surge of new rooms combines with a decline in rates and visitors after the Olympic Games.

About 7,000 rooms will be added this year, a 6.7 percent gain, bringing London’s total to 114,000 by the end of 2012, Jones Lang LaSalle Hotels said in a report. An additional 5,400 rooms, a 4.8 percent increase, are expected in 2013. That compares to average annual supply growth of 2.4 percent from 2003 to 2011, according to the company, part of Chicago-based broker Jones Lang LaSalle Inc.

London ranks among Europe’s most resilient hotel markets as many of its neighbors struggle with the effects of financial-market turmoil and the sovereign-debt crisis. While the city will continue to be a top destination, gains in revenue per available room, a measure of occupancy and rate, will probably shrink as the high demand from the Olympics is unlikely to be sustained, a Jones Lang LaSalle Hotels survey showed in May.

“You will see a bit of a softening of prices and a slowdown in rate growth,” Jon Hubbard, chief executive officer for Jones Lang LaSalle Hotels’s Europe, Middle East and Africa region, said in a telephone interview. “But with market demand as low as it has been in the past few years, and the restraint in lending, London has been somewhat undersupplied and is in a position to absorb this new supply over the coming years.”

Rates Soar

For the Olympic Games, which run from July 27 to Aug. 12, average room rates across London have soared 69 percent from a year earlier to 189 pounds ($295), research and consulting company TravelClick Inc. said in a report this week.

London had a 78 percent hotel occupancy rate this year through May, the highest among the top 31 European cities, according to lodging-data provider STR Global. It ranked fifth in average nightly rates behind Geneva, Paris, Zurich and Tel Aviv, STR Global said.

London occupancy during July and August usually ranges between 80 percent and 90 percent, according to the Jones Lang report, which didn’t give a specific forecast for occupancy during the Olympic Games.

The Lanesborough, a luxury hotel near Buckingham Palace, is fully booked for the games, Malin Lund, a spokeswoman, said yesterday. That includes a suite for 14,000 pounds a night, the most expensive in London, that comes with a complimentary chauffeur-driven Rolls-Royce Phantom.

Olympic Visitors

About 320,000 visitors will converge on the U.K. capital for the games, many of them competing with invitees of Britain and the International Olympic Committee for hotel rooms, according to April estimates by the government’s VisitBritain office.

New properties this year include Marriott International Inc.’s Bulgari Hotel & Residences, which opened in the second quarter in the city’s Knightsbridge neighborhood.

Travelodge Ltd., London’s biggest hotelier, opened its 500th U.K. property in Stratford, home of the Olympic Stadium, on March 4 and planned to start service at another six in the city before the event begins. Travelodge last month advertised discounted prices ranging from 25.50 pounds to 95 pounds for stays from July 26 to Sept. 9, according to an e-mail promotion.

Intercontinental Hotels Group Plc, the official hotel provider for the Olympics, is scheduled to open the 245-room InterContinental London Westminster in November.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE