Hotel occupancy rates in the UK's second city rose to 68% in July 2011, up from 66% in the same month last year and further improvement in 2012 is expected, according to leisure sector experts at PwC in the Midlands. The findings are based on data provided by STR Global.

Despite the growth in occupancy rates, trading conditions in the region remain tough, with leaner pricing opportunities. While a further growth in national occupancy rates of around 3% is expected next year, prospects in the Midlands and other UK regions are less promising than in London, where the sector has experienced a bumper summer and is looking forward to benefiting from next year's Olympic-effect.

Reflecting the challenging trading conditions, the average daily rate for hotel rooms in Birmingham fell to £47 in July 2011, down from £50 in the same month last year. Revenue per room (RevPAR) also fell slightly - to £32 in July 2011 from £33 for the same month in 2010.

Matthew Mullins, partner and hospitality leisure sector expert at PwC in the Midlands, said:

"It is good to see that occupancy rates are on the climb. This will be a welcome boost for local hoteliers and leisure sector investors who have experienced difficult trading conditions as a result of the downturn.

"While London has been leading the sector's recovery to date, 2012 should be a better year for hoteliers outside the capital too. To some extent, the Olympic uplift will also be felt in the Midlands region."

London has seen extensive new luxury supply openings recently  and the luxury sector enjoyed a 14% growth in the average daily room rate (ADR) in the first half of 2011, taking rates to £271. Next year, a further 5.7% growth in ADR is forecast.

In the run up to the Olympics, a large amount of additional supply is coming on line in the capital, bringing new names and brands to the scene. For the remainder of 2011 and 2012, around 6,000 rooms are expected to open in London.

Matthew Mullins added:

"London needed an injection of stylish new products and this has strengthened the capital's appeal. While it is early days, there are signs that this focus on luxury, high-end supply could also be beginning to have a positive effect on the hotel landscape in the Midlands."