Hotels face hard 2013 as supply outstrips demand

London's hotel sector is set to suffer an Olympic-sized hangover this year amid a glut of new hotel rooms and slumping demand, a report from PricewaterhouseCoopers warns.

PwC said the average price of a London hotel room would fall 2.7 per cent this year to £139.07, although this still leaves the capital the fourth most expensive of the 19 major European cities in its market study.

The impact of another 5,000 new rooms in the capital – including operator Shangri La's 202-room hotel spread over 19 floors of the Shard skyscraper, due to open in the spring – also means occupancy rates will slip at established luxury destinations such as The Savoy in The Strand and The Ritz in Piccadilly. London's standard industry benchmark – revenues per available room – will fall 6.8 per cent this year according to PwC's forecasts, leaving the capital the worst performer among Europe's leading cities.

But London's global status should ensure any difficulties are merely a blip, the report adds. It says it does not expect "temporary factors", such as the surge in supply, "to hold London back for long".

None of the cities covered in the report are expected to show double-digit growth in revenues per room this year because of prolonged economic weakness. Robert Milburn, hospitality & leisure leader at PwC, said: "A return to a steady state of economic growth is not likely in the short term and the hotel industry has to adapt to this 'new normal'.

"Our 2013 forecast depends largely on how the eurozone crisis evolves. We expect steady growth in many cities, but if the crisis escalates, we may see even less promising results for the hotel industry."