The latest HotStats survey by TRI Hospitality Consulting reports that London hoteliers dispelled any rumours of a post-Olympic depression as occupancy levels rose by 3.1 percentage points to 89.4% in the months of September. Despite a year-on-year decline of 3.2% in average room rate from £141.82 to £137.26, the increase in occupancy levels resulted in a 0.6% increase in Revenue Per Available Room (RevPAR) for the month.
During the same period, Total Revenue per Available Room (TrevPAR) increased by 1.3%, underpinned by a strong increase in non-rooms departmental revenue of approximately 19%. Jonathan Langston, managing director at TRI commented:
“Whilst there were rumours of a potential post-Olympic slump as experienced in previous host cities, which appeared even more plausible if you take the challenging economic environment into account, London hoteliers have responded with the strongest September occupancy performance recorded since HotStats began capturing data for the London full-service hotel market.”
The most successful Paralympic games in history
The strong performance can, in part, be attributed to London hosting the most successful Paralympic games in history, drawing record breaking crowds to stadia and event venues; but the capital also witnessed a late increase in visitors as data from the unique HotStats benchmarking service reveals that the increase in occupancy levels was underpinned by a 22% increase in leisure-related demand, whilst corporate related demand has remained softer year-on-year.
As a result of the robust growth in non-rooms revenue for London full-service hotels, Gross Operating Profit per Available Room (GOPPAR) for the month increased by 0.8% to £86.41. The growth in profit levels was softened by rising costs, in particular travel agent commissions (4.5%) and utilities (8.1%).
Langston said:
“As always, London continues to exceed expectations. Whether it be in putting on potentially the greatest Olympic and Paralympic games ever or bucking the historic trend of a post-Olympic slump, London hoteliers have benefited directly from a strong summer of events. Despite the initial slump in headline performance figures during June and July, the strong start to the year, in addition to the performance in August and September, has almost guaranteed that year-on year performance for London hotels in 2012 will be up on 2011, as profit levels have already increased by 6.6% in the calendar year”.
UK Provincial hotel market
As a result of the flat RevPAR performance in the month of September, the UK Provincial hotel market GOPPAR performance declined by 1.6%, already making the gains experienced in August a distant memory according to the HotStats survey.
Occupancy levels during the month of September increased by 2.5 percentage points from 77% to 79.5%, primarily underpinned by an increase in leisure-related demand (+16%). However, any anticipated increases in RevPAR were short lived as the growth in volume was cancelled out by a by 3.1% drop in achieved average room rate to £72.16. Despite the flat RevPAR performance, as a result of the increase in volume non-rooms revenue at Provincial hotels experienced a 0.7% increase and ensured that TrevPAR growth remained positive at+0.3%.
Rising costs hamper profit
Despite the UK inflation rate being at its lowest in nearly three years at +2.2% in September, rising costs continue to hamper the efforts of hotel managers to record profit growth. This month witnessed year-on-year increases in utility (+7.3%), food (+0.6 percentage points) and payroll costs (+0.3 percentage points), which, for the most part, are out of the control of hotel managers.
As a result of the movement in revenue and costs, GOPPAR has once again declined by 1.6% to £36.55 and by 3% to £26.00 for the calendar year.
Back to the old routine for Provincial hoteliers
Langston sees continued cost increases:
“Unfortunately there appears to be no respite for Provincial hoteliers and we anticipate that profit levels will continue to erode as food prices are set to soar with adverse weather conditions over the summer having blighted UK harvests. Furthermore, energy suppliers such as Npower and British Gas are set to increase their gas and electricity prices well above the rate of inflation before the end of this year by as much as 9%. Coupled with a sustained economic recession which continues to have a negative impact on key hotel demand generators, the prospects for the provincial hotel market are not bright.”
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