HotStats UK Chain Hotels Market Review – November 2012

Whilst November 2011 was a stinker, with profit per room dropping by 2.4% for hotels in the capital, the same month this year was far worse. Aside from the 9.3% decline in Gross Operating Profit per Available Room (GOPPAR) in June, at 5.6%, this month was the worst year-on-year drop in profit in 2012.

The 1.4% year-on-year increase in food and beverage revenue to £35.50 per available room was not enough to offset the 2% decline in Total Revenue per Available Room (TrevPAR) this month, which was primarily due to the 3% decline in rooms revenue and a 7.1% drop in meeting room hire revenue per available room.

Despite a 0.1 percentage point increase in the proportion of demand attributed to the residential conference sector, this segment was clearly weaker than in November 2011, with the sector rate declining by 7.9% to £148.66.

In addition, rate declines were also suffered in the non-discounted Best Available Rate (-7.2%), leisure (-2.6%) and groups/tours (-6.7%) segments, which contributed to the overall decrease in achieved average room rate of 2.7% to £136.41 from £140.19 during the same period in 2011.

"Not even a 3% increase in the number of visitors to WTM, to almost 29,000 trade visitors, was enough to save face for hotels in London and the drop in achieved average room rate for November was the greatest year-on-year margin of decline in this measure in 2012.

Although volume remained strong in the city and hotels in London are undoubtedly on course to achieve a third consecutive year of profit growth, it is unlikely that hoteliers will be popping champagne corks as they look to more challenging times ahead," said Jonathan Langston, managing director of TRI Hospitality Consulting.

The decline in revenue levels also led to an uncharacteristic increase in payroll for hotels in the capital, up by 1.5 percentage points to 23.6 per cent of total revenue for the month.

Despite the decline across all measures, profit levels remained high for the city in November at a GOPPAR of £79.10, approximately 5% above the year-to-date average, and at a conversion of 48.6% of total revenue.

Another damp squib for Provincial hotels in November as costs stifle profit growth

The spark of hope for a strong finish to 2012 for Provincial hoteliers, which was lit in October, has turned out to be a dud as hotels in the Provinces suffered a 4.8% decline in profit per room in November, according to the latest HotStats survey.

Once again, the Provinces overall have successfully achieved increases in both room occupancy (+0.5 percentage points) and achieved average room rate (+0.5%), enabling a 1.2% increase in Revenue per Available Room (RevPAR) to £49.71 from £49.13 during the same period in 2011.

Indeed, this is the eighth month in 2012 in which hotels in the provinces have recorded an increase in RevPAR. Furthermore, in line with the increase in rooms revenue this month, hotels in the Provinces recorded a 2% increase in food and beverage revenue.

However, the total revenue achieved by Provincial hoteliers was negatively impacted by a decline in other ancillary revenues, such as meeting room hire revenue per available room, which suffered a year-on-year decline of 4.8%.

And as a result of rising costs, the positive (+1.1%) TrevPAR performance for November was reduced to a 4.8% decline in profit per room to £26.03, equivalent to a profit conversion of 27% of total revenue.

Contrary to the growth in total revenue, payroll levels increased by 0.6 percentage points to 33 per cent of total revenue from 32.4 per cent of total revenue during the same period in 2011.

Additionally, the rocketing cost of travel agent's commissions were once again a focus of concern for Provincial hoteliers as this measure increased by 2.6% on a per room let basis, to £5.17, equivalent to 7.3% of rooms revenue.

"Unfortunately, the profit decline recorded by Provincial hotels in November was one of the worst this year and completely undoes the positive performance in October. And whilst costs continue to rise beyond increases in revenue, it is unlikely that hoteliers will get much of a break from the perpetual bad news," said Langston.

Despite the overall decline in profit per available room in the Provinces, those markets which were burning bright in November included Oxford, Leeds and Plymouth.

In Oxford a 0.1 percentage point drop in room occupancy was offset by a 6% increase in achieved average room rate, which contributed to a 3.3% increase in profit per room, to £45.33, equivalent to a profit conversion for hotels in the city of 39% of total revenue.

The UK Chain Hotels sample is composed of 557 hotels with an average hotel size of 182 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.