HotStats UK Chain Hotels Market Review – June 2012
Hotels in London recorded by far the worst performance of 2012 as the extended holiday for the Queens Diamond Jubilee and governmental warnings around transport and fears over accommodation pricing before and during the Olympics meant that the city suffered a detrimental decline in business visitors, according to the latest HotStats survey of approximately 560 full-service hotels across the UK by TRI Hospitality Consulting.
London hoteliers undone by Jubilee celebrations and Olympic anxiety
Hotels in London recorded by far the worst performance of 2012 as the extended holiday for the Queens Diamond Jubilee and governmental warnings around transport and fears over accommodation pricing before and during the Olympics meant that the city suffered a detrimental decline in business visitors, according to the latest HotStats survey of approximately 560 full-service hotels across the UK by TRI Hospitality Consulting.
Profit per room at London hotels declined by 9.3% in June to £85.87 as Total Revenue per Available Room (TrevPAR) dropped by 5.0% to £165.83 on the back of a 5.7 percentage point decline in room occupancy to 83.3%.
Although at 0.8% the drop in achieved average room rate for London hotels in June was minimal, it represented the first time in 32 months that this measure suffered a drop, to £148.18 from £149.34.
The drop in revenue was further exacerbated by a 2.1% increase in payroll costs per available room to £35.99, contributing to a 1.5 percentage point increase in payroll to 21.7% of total revenue.
The 2.1 percentage point increase in demand from the leisure sector, driven in part by the first week’s play at Wimbledon, was not enough to offset the decline in business demand due to the double bank holiday over the Diamond Jubilee, which had a similar effect on London hotel performance as the Royal Wedding in April 2011, and pre-Olympic travel anxieties.
The residential conference sector was the worst hit with a 0.9 percentage point decline in the proportion of demand attributed to this segment combined with a 6.7% decline in the achieved sector rate to £171.19 from £183.40. In addition, the achieved rate in the Best Available Rate (BAR) sector, which is a good barometer of peak demand periods, dropped by 13% to £177.17 from £203.67.
“Although the Jubilee festivities enabled London to look busy in June, the city was primarily filled with day visitors with everyone else choosing to escape to the country or overindulging on street party tea and scones.
Amongst the doom mongering brought about by the decline in headline performance levels, we must remember that at a room occupancy of 83.3% and an achieved average room rate of £148.18, the performance in June was well ahead of the year-to-date stats and remains very strong,” said David Bailey, deputy managing director at TRI.
Provincial performance is a wash out and the rain threatens to prolong the pain
Hotels in the Provinces suffered a decline across all measures in June as volume in the business segment was hit by the extended Jubilee bank holiday and price in the leisure sector softened as the rain fell relentlessly, according to the latest HotStats survey of approximately 560 full-service hotels across the UK.
Whilst the 5.0% decline in profit per room for Provincial hotels was not an unfamiliar trend in 2012, hotels in the regions struggled to increase Revenue per Available Room (RevPAR) in June as they have successfully done so in most other months.
Although achieved average room rate remained comparatively stable, hotels in the Provinces suffered a drop in the proportion of demand attributed to the corporate (-3.6 percentage points) and residential conference (-0.6 percentage points) sectors to a cumulative total of 37.5% of total demand, which is low for June.
Additionally, as the popularity of ‘staycations’, which have supported Provincial hoteliers so favourably since the onset of the current economic downturn, continues to wane due to the terrible weather and strengthening sterling, hoteliers are dropping rates, exemplified by a 2.7% decline in achieved rate in the leisure sector in June.
Provincial hoteliers are also relying more and more heavily on support from third party websites to drive leisure demand into their hotel, with this measure increasing by 11.4% on a per room let basis in June, to £4.61, equivalent to 6.4% of rooms revenue. Added to other deductions related to ‘Direct Rooms Expenses’, this resulted in an achieved Net Average Room Rate of £61.46 for June, against £62.53 during the same period in 2011.
“Provincial hoteliers just can’t seem to catch a break at the moment. The poor weather has caused events that would usually drive the demand for hotel accommodation to be cancelled across the country, such as the North Yorkshire County Show, the CLA Game Fair at Grantham and the Godiva Festival in Coventry.
And although the ONS is reporting year-to-date inflation levels declining to 2.4%, which is good news for food costs, a lack of rain in the US and too much rain in the UK is threatening to put upward pressure back on to food prices in the medium term,” added Bailey.
Profit per room in the Provinces has now declined by 5.1% in the first half of 2012 to £22.94 from £24.16 during the same period in 2011.
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.