New research by accountants PwC shows the outlook for London remains positive but will slow to growth of 0.4% this year and 0.3% next year thanks to a combination of week demand and increased room supply.
Global hotels company STR research shows as many as 9,000 rooms could open in London in 2018, more than the 8,000 that opened in preparation for 2012.
Average daily rate (ADR) growth will also be down to 0.2% this year, considerably less than the 4.3% seen last year.
It will take the average daily room rate to £149 in 2018 while better growth of 1.6% in 2019 will see it rise by 1.6% to £151.
Revenue per available room (RevPAR) will grow by 0.6% to £122 before jumping by 1.9% in 2019 to £124.
Liz Hall, head of hospitality and leisure research at PwC, said: “Since the start of this year we have seen London’s challenging period of hotel trading experienced in much of the second half of 2017 continue, dampening growth forecasts.
“The boost to inbound holidays from the weak pound has started to fizzle out and ongoing uncertainty around Brexit and the fragile economy is a recipe for some tough year-on-year comparisons for the next few months.
“This year, one of the main challenges to growth is demand. With more rooms potentially set to open in London than the Olympic year, that will mean a lot of rooms to fill.
"Hotels will be looking to events such as the Royal Wedding in May to provide an uplift while other events like the Farnborough International Air Show and additional unique sporting events will do the same for the regions.“
In the regions, other cities that could see a glut of hotel rooms opening include Manchester, Belfast, Glasgow and Edinburgh.
However, Hall said this was unlikely to impact occupancy rates which reached 76% last year and is expected to see further growth of 0.6% this year and next.
ADR is set to grow modestly this year with 0.6% growth, climbing to 1.2% in 2019 taking nominal ADR to £72.
RevPAR is forecast to see 1.1% growth this year, taking it to £55 with an additional 1.4% gain in 2019 lifting RevPAR to £56.
Hall said: “We expect hotel trading in many regional cities to remain relatively buoyant, driven by a variety of factors such as business travel and short leisure breaks.
"However, international destination cities could also feel the impact of the weak pound effect diminishing and of increasing new supply additions.
“Occupancy rates outside the capital have been climbing from around 70% in 2012 to a record high of 76% last year. Over the next two years we expect occupancy to edge up only a little, largely reflecting the continued expansion of the branded budget hotel sector. ”
