HotStats European Chain Hotels Market Review – July 2010
London hoteliers on a high after record breaking room occupancy
TRI has been publishing the performance of the European hotel market on a monthly basis for the last ten years, but this is the first time that London, or any market in its European sample, has achieved such a remarkable room occupancy. Following the 92.2% room occupancy in July 2009, there did not appear to be any opportunity for further growth in the market during the same period this year, but at 94.1% it is clear that London hoteliers have more effectively distributed latent demand across shoulder and low periods this time around.
“The achievement is particularly impressive considering that our data is recorded from a sample of almost 50 hotels in London. Although some hotels would undoubtedly have achieved below average room occupancy levels, it is conceivable that a number of hotels in our sample achieved a room occupancy closer to 100%” added Langston.
The capacity of London was stretched in July due to significant levels of demand derived from the flocks of tourists, the recovering commercial sector as well as Middle Eastern families escaping the searing heat of their home countries. And this year, London hoteliers had the added bonus of demand generated by the biennial Farnborough Air Show.
In addition to the record breaking room occupancy, at €206.24, hotels in our London sample, which is primarily comprised of properties operating in the four and five-star sector, recorded the highest achieved average room rate since November 2007. As a result, the London hotel market achieved a year-on-year growth in Revenue per Available Room (RevPAR) of 26.2% to €194.06.
The strength of demand means that London continues to outpace competitive markets throughout Europe. At a Gross Operating Profit per Available Room (GOPPAR) of €139.28 in the month of July; and a year-to-date average of €99, the UK capital is operating significantly above its closest competitor Paris, which at €63.04 in the seven months to July 2010 is more than 50% lower than London.
High costs hinder profitability in Rome and Paris
Rome, Paris and London are amongst the most successful hotel markets in Europe in terms of achieved Total Revenue per Available Room (TrevPAR) but it appears that the French and Italian capitals have to work twice as hard to achieve the same profitability as the UK capital, according to the latest HotStats survey.
Whilst London hoteliers were achieving a profitability conversion at a gratifying 55.6% in July on the back of an achieved TrevPAR of €250.46, Paris and Rome suffered due to high cost levels, resulting in a much lower conversion.
For Paris in July, in addition to the abundance of tourists to the city, high demand levels from the annual showpiece event of the final stage of the Tour de France was enough to drive a TrevPAR of €209.84 in the French capital, which was within 20% of the level achieved by London. However, with payroll costs at 36.2% of total revenue in Paris, compared to 20.1% in London, the difference in profit conversion between the two markets is more than 20 percentage points, as the French capital converted at 35.3%.
Similarly, whilst Rome achieved a TrevPAR of €223.64, primarily due to a strong performance in the rooms department, with a room occupancy of 84.9% at an achieved average room rate of €183.71, hotels in the city converted at just 23.2% of total revenue. With a payroll cost almost double that of London, at 38.5% of total revenue in July, it is not hard to see why profit conversion levels remain a challenge in the Italian capital.
The hotels profiled in this report are drawn from the HotStats database and reflect the portfolios and distribution of the hotel
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.
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