HotStats UK Chain Hotels Market Review – July 2010
London cruising at altitude as Farnborough Air Show drives profitability
The location of the biennial Farnborough Air Show is more than one hour’s drive time from central London, but such is the calibre, and volume, of the attendees and the limited availability of hotel stock in the local area, that demand will typically be displaced to London.
During the week, the seven-day event acts as a trade show with 1,300 exhibitors, attracting an audience which will include a high proportion of wealthy independent investors, which in 2010 resulted in $47 billion worth of orders being announced. This was followed by a public weekend which attracted 108,000 visitors.
The strength of demand meant that headline performance levels in 2010 surpassed those achieved in the capital the last time the event was held in July 2008, at a room occupancy of 88.4% and an achieved average room rate of £133.20. As a result, RevPAR in 2010 was approximately 11% above 2008.
“In July, London hoteliers will typically benefit from strong headline performance levels derived from the flocks of tourists, demand from the commercial sector as well as Middle Eastern families escape the searing heat of their home country. The Farnborough Air Show allows hoteliers in the capital to effectively yield the excess capacity”, said Jonathan Langston, managing director, TRI Hospitality Consulting. UK Chain Hotels Market Review – July 2010
Provincial hoteliers warm to the idea of a recovery
The now distant memory of a warm summer helped hotels in the Provinces to achieve their biggest growth in profitability since pre-recessionary times, according to the latest HotStats survey.
The 9.3% growth in GOPPAR was as a result of a 5.6% increase in RevPAR, in addition to a well-managed cost base. As commercial-driven cities were left languishing by the absence of business travellers, tourism-led locations such as Brighton, Stratford-upon-Avon and Bath are once again benefiting from the fragility of consumer confidence and the safety of staycations.
Whereas in 2009 provincial hoteliers in tourist led locations were able to drive RevPAR through a growth in room occupancy, in 2010 they have been able to increase leisure rates whilst maintaining volume. This is exemplified by the performance of Bath, which achieved a room occupancy of 92.2% at an achieved average room rate of £103.42 this month, which resulted in a RevPAR increase of 15.2% to £95.37.
“Although the demand for hotel accommodation from corporate sources has declined during the summer, this loss has been more than offset by an increase in demand from the leisure sector,” added Langston.
Heathrow hoteliers on a high despite BAAs flat passenger growth
Despite BAA posting an increase of 0.3% across its portfolio of airports, the UK growth was
Heathrow recorded its busiest ever month in July, as the airport handled 6.7 million passengers, with Sunday 18 July acknowledged as the busiest ever day with 232,000 passengers using the airport. According to BAA, the main source of passenger growth at Heathrow during July was the European market, where additional capacity fuelled an increase of 9.5%.
In addition to the 3.5% increase in passenger numbers at Heathrow Airport, volume swelled dramatically at Heathrow hotels due to demand displaced from the Farnborough Air Show as well as an increase in the proportion of roomnights attributed to the corporate and conference sectors.
As a result room occupancy in the Heathrow hotel market increased by 8.8 percentage points to achieve a stunning 91.2% at an achieved average room rate of £73.24, following a 6.7% increase, according to the latest HotStats survey. The resultant 18.1% increase in RevPAR contributed to a 30.1% increase in GOPPAR, to £40.44 per available room. UK Chain Hotels Market Review – July 2010
The UK Chain Hotels sample is composed of 519 hotels with an average hotel size of 184 bedrooms. The hotels profiled in this report are drawn from the HotStats database and reflect the portfolios and distribution of the hotel chains that we survey and which operate primarily in the three and four-star sectors. Please note: The data samples are reviewed and rebased each year to reflect the changes in the HotStats survey base. As a result, performance ratios published last year may differ from those contained within this report.
Occupancy (%) is that proportion of the bedrooms available during the period which are occupied during the period.
Room rate (ARR) is the total bedroom revenue for the period divided by the total bedrooms occupied during the period.
Room Revpar (RevPAR) is the total bedroom revenue for the period divided by the total available rooms during the period.
Total Revpar (TrevPAR) is the combined total of all revenues divided by the total available rooms during the period.
Payroll % is the payroll for all hotels in the sample as a percentage of total revenue.
GOP PAR is the Total Gross Operating Profit for the period divided by the total available rooms during the period.
TRI Hospitality Consulting provides a wide range of services to clients in the hotel sector. It has offices in London, Dubai and Madrid.