HotStats UK Chain Hotels Market Review - August 2013

That Olympic Effect Reviewed in Full
As anticipated, the year-on-year comparison for London’s hotel market in August was negative with total revenues per available room (TrevPar) decreasing by 14.5% and a drop in Gross Operating Profit per available room (GOPPAR) of 27.7%, according to the latest HotStats survey of 624 full-service hotels across the UK.

Hotel performance last year was boosted by the 2012 Summer Olympics held in London and several satellite cities from July 27 to August 12, and the expected year-on-year drop was further fuelled by a fear of oversupply created by pre-Olympic developments. .

Inevitably RevPar in August showed a year-on-year decrease of 12.4%. Considerable differences in the market mix caused meeting room revenues to drop by 60% which contributed to the overall year-on-year fall in TrevPar of 14.5%. Besides decreasing revenues, profitability in the rooms department was impacted by cost increases such as direct expenses (-5.1% per room let).

However, in the fairer comparison with 2011 performance the picture is much more positive: RevPar in the month in 2013 was a massive 26.4% above August 2011 and the two-year perspective shows that departmental profitability improved by 3.3 percentage points compared to August 2011 when rooms payroll was higher than this year.

Rising rooms revenues and cost control allowed hoteliers in London to register profit growth in the rooms department of over £20 per room let (2013 vs. 2011).Similarly, the strength of the conference segment in August 2012 secured additional non-rooms revenues and profits such as £11.20 F&B operating profits per available room (which decreased by approximately 60% this year). Consequently F&B profits (PAR) were recorded at 73% above August 2011.

When comparing August 2013 as the post-Olympic year to 2011, the pre-Olympic year, hoteliers achieved an increase of approximately 22.4% in TrevPar and 49% in GOPPAR. To put that into context, GOPPAR in Paris grew by approximately 33% over the same period.

2013 – The Year of the Provincial Profit?
The provinces showed a 13th consecutive month of total revenue growth and a sixth month of profits growth this calendar year, according to the latest HotStats survey of 624 full-service hotels across the UK.

RevPar in August increased by 7.4% year-on-year thanks to an increase in ARR of 2.6% (equivalent to £1.79) and a rise in occupancy to 78.1%. Consistent cost control helped to bring the total revenue growth of 6% to the bottom line with profits per available room amounting to £28.88 (+11.1% y-o-y).

Birmingham, which benefitted last year from Olympic teams setting up their training base in the city, showed further growth this year: While total revenues increased by £2.11 per available room (+2.6%), overhead and payroll costs were diminished and enabled a 9.7% GOPPAR growth.

Manchester experienced a GOPPAR increase of 19% in August last year and was the second Olympic satellite city that did not suffer from any post-Olympic year-on-year setback in the month. Rising occupancy and higher ARR resulted in a rise in RevPar of 14.2%. Furthermore, revenues from the sale of beverages increased by 22% and helped to achieve a TrevPar growth of 10.3%. Despite rising travel agents commission per room let, the profitability of the rooms department increased and so did total departmental profit per available room (+12.5%). Thanks to decreasing payroll, the rise in overhead costs (9.9%) was counterbalanced and GOPPAR performance was positive (+15.9%) for hotels in Manchester.

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.

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HotStats provides two reporting tools to hoteliers: 1. 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. 2. 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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