HotStats UK Chain Hotels Market Review – May 2013

Hotelier’s in London saw a second month of profit growth this year (+2.6%) mainly driven by room revenue increases of 2.6%, according to the latest HotStats survey of approximately 625 full-service hotels across the UK.

In fact, the capital showed positive year-on-year results across all key performance indicators with total revenues per available room (TrevPar) rising 1.4% thanks to an increase in revenue per available room (RevPar) of £3.22.

With occupancy 4.6 percentage points above the rolling 12 months’ average at 85.1% and Average Room Rate (ARR) growing by 1.1%, RevPar achieved a peak in this calendar year of £127.20. The average so far in 2013 is £104.38, 1.3% below last year.

Besides the rooms department, beverage and leisure were the main revenue drivers in May whereas meeting rooms and minor operated departments (MOD) recorded a year-on-year decrease.

Profit conversion improved by 0.6 percentage points in May to 48.7% of total revenues. However for the calendar year profit conversion is still below its 2012 level at 42.3% due to a number of factors such as rising utility costs, food and beverage cost of sales and direct expenses in the rooms department, which, despite decreases in payroll cost had a negative effect on the bottom line performance in London.

The market segmentation in May was in line with the last 12 months’ picture: Corporate is the biggest segment accounting for 28.2% of all room nights over past 12 months (27% in May) at an ARR of approximately £163. Residential Conference is the segment delivering the highest rate over the last year at approximately 20% above ARR. A year-on-year increase in May (+5.6%) to £180.38, however, came with a slight decrease in volume as well as the drop in meeting room revenues, as previously mentioned.

Positive Performance in the Provinces and Contrary Weather in Scotland
Profit growth in the provinces has slowed after last month’s spring fever. Nevertheless UK’s provincial hotels recorded a positive performance in May resulting in a 0.8% increase in Gross Operating Profit (GOP) per available room, according to the latest HotStats survey of approximately 625 full-service hotels across the UK.

As for London, May is a strong month for provincial hoteliers and this year resulted in occupancy reaching 74.4%, 4 percentage points above the 12 months’ average. With occupancy rising 1 percentage point and ARR increasing 1% year-on-year, revenue per available room (RevPar) went up by 2.4%. Increasing rooms revenues were further supported by growth in food and leisure revenues of 1.3% and 4.8% respectively, adding up to a rise in TrevPar of 1.5%. Despite increased payroll costs, TrevPar gains converted into profit growth of 0.8%.

One of the winners of this month’s HotStats survey is Edinburgh which achieved 17% TrevPar growth and a striking 40.4% surge in GOPPAR. Whilst food and beverage (F&B) profit conversion dropped slightly, increased restaurant and bar and conference and banqueting revenues helped push F&B profits per available room up 14.1%.

In Glasgow on the other hand TrevPar decreased by 3.1%, driven by a fall both in ARR and non-rooms revenues. An increase of 1 percentage point in utility costs from 4% to 5% of total revenues contributed amongst other factors to a drop in gross operating profit per room (GOPPAR) of 6.8%.

Aberdeen, the third biggest Scottish city, was able to grow its RevPar by 19.7% thanks to significant increases in ARR and a stable level of occupancy of 79.7%. A reduction in overheads cost per available room of 12.5% helped pushing GOPPAR up 22.3% to £56.85 from £46.48 in May 2012.

The UK Chain Hotels sample is composed of 624 hotels with an average hotel size of 177 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.
Average 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.
GOPPAR is the Total Gross Operating Profit for the period divided by the total available rooms during the period.

Services: For an inside view of a local or regional market place in the hotel sector, bespoke HotStats reports are available. Terms and conditions apply. Visit www.hotstats.com to view a sample report.

HotStats provides two reporting tools to hoteliers:

• Our unique profit and loss benchmarking service which enables monthly comparison of hotels’ performance against their competitors. It is distinguished by the fact that it provides in excess of 100 performance metric comparisons covering 70 areas of hotel revenue, cost, profit and statistics providing far deeper insight into the hotel operation than any other tool.
• Our latest innovation in daily revenue intelligence, MORSE. Amongst its reporting are daily and highly granular market segmentation metrics as well as distribution channel and source of booking analysis. It takes daily market intelligence to a whole new level.

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