UK Chain Hotels Market Review – March 2010

More stable trading conditions for UK Provincial hotels and the London recovery resulted in an 8.3% increase in March 2010 UK Gross Operating Profit per Available Room (GOPPAR) performance according to the latest HotStats survey from TRI Hospitality Consulting.

The big winner has been London which showed a massive 17.6% rise in GOPPAR in March. The provinces showed a more modest fall, of 2.5%, compared to previous months on this same measure.

After turbulent weather over the winter period affected UK provincial performance, there were more stable trading conditions in March to register a 3.0 percentage point increase in occupancy performance (to 69.3%). Average room rate increased by 0.8% in March to £87.88. Total Revenues per Available Room (TrevPAR) increased by 2.9% to £106.22.

“Average room rates are now growing, at least in London, and this has helped secure a healthy rise in RevPAR. Hoteliers have also managed to get to grip with their cost structures, which has transformed GOPPAR performance,” said Jonathan Langston, managing director, TRI Hospitality Consulting.

Since the beginning of the calendar year, commercial sector rates in the provincial market have stabilised when compared to previous year performance, whilst leisure sector rates have also remained relatively stagnant, in order for provincial hoteliers to maintain occupancy levels. In February and March this year average room rates declined by 4.7% and 4.6% respectively, this compares to a decline of 5.2% and 6.5% in December 2009 and January 2010.

“Whilst the level of decline in average room rate performance is reducing it is still difficult to predict whether provincial hotel market performance is reaching its low point, or if there are still tough trading conditions ahead – particularly when considering the election is looming and the knock-on-effect on the economy and to the domestic consumer,” added Langston.

London Continues to Recover at Pace

The post-recession bounce continued in London, as full-service hotels achieved occupancy growth of 3.6%, and average room rate growth of 5.5%, resulting in RevPAR growth of 10.4% for the month of March 2010, when compared to March 2009.

Despite the BA strikes which, according to Visit Britain, disrupted a third of customer flights, passenger traffic at Heathrow increased by 0.4% compared to March 2009. Latest data estimates provided by Visit Britain also indicate that in 2009, the volume of international business visits to the UK dropped by almost 20 per cent. The inevitable pick-up in commercial demand from the depths of the recession this time last year coupled with continued robust leisure demand has meant that London hoteliers have been able to enhance average room rate and occupancy performance.

“All trends suggest that London recovery is continuing at a sustained pace, with London GOPPAR performance now down only 1.8% in the 12 months to March 2010. However, the volcanic ash cloud is likely to have impacted April’s trading and, therefore, the rate of recovery” commented Langston.

BA Strikes Hinders Passenger Traffic Growth at Heathrow – Whilst Airports Face Tough Market Conditions

Whilst Heathrow Airport passenger numbers rose in March 2010 compared with previous year performance, the group was impacted by the strikes and tough trading conditions, resulting in a 1.5% decrease in passenger numbers.

For March, Stansted Airport experienced a 4.2% drop in passenger traffic, despite being one of the few airports not affected by the BA strikes. BAA estimate that if the strikes had not gone ahead, Heathrow passenger traffic would have increased by 3.8 per cent rather than the 0.4 per cent achieved.

Scotland’s airports experienced continued decline, reporting a 5.8% drop in passenger traffic. In contrast to Southampton airport grew by 5.3 per cent. Overall, passenger numbers fell by 200,000 to 8.2 million in March.