HotStats UK Chain Hotels Market Review – November 2015

Glasgow Hoteliers Missing Their MTV as Year-on-Year Profit Levels Plummet

Year-on-year profit levels at Glasgow hotels fell by 17.2% this month as the city's hoteliers lamented the absence of MTV European Music Awards-related demand which fuelled a 35.1% increase in RevPAR (Revenue per Available Room) this time last year, according to the latest data from HotStats.

The high-profile awards event is hosted by a different European city each year and generates significant demand for accommodation in the chosen destination, with research suggesting 8,000 hotel room nights were booked locally when Belfast hosted the event in 2011. It is therefore not unexpected that the performance of Glasgow hotels this month should pale in comparison to the stand out performance of 12 months ago. Despite the decline, at £43.86 for the month, GOPPAR (Gross Operating Profit per Available Room) at hotels in Glasgow was 20.9% above levels achieved in November 2013 at £36.28, illustrating the extent to which hoteliers have benefited from the elevated profile of Glasgow as a visitor destination in recent years.

The current strength of demand at Glasgow hotels is further illustrated by RevPAR for the month of November recorded at £69.17, 21.8% above the levels achieved during the same month in 2013 at £56.78. In addition to the MTV European Music Awards, Glasgow also hosted the Commonwealth Games and Ryder Cup in 2014, which have undoubtedly had a continued positive impact on hotel performance in 2015.

However, in addition to year-on-year decreases in occupancy (-2.0 percentage points) and achieved average room rate (-7.6%) this month, hotels in Glasgow suffered year-on-year declines in revenue in Food & Beverage (-2.3%), Conference & Banqueting (-3.4%) and Minor Operating Departments (-21.1%), which contributed to a 6.9% decline in TrevPAR (Total Revenue per Available Room). Increases in labour (+1.0%) and overhead costs (+0.7%) contributed to the 17.2% profit decline.

November Profit Wobble Will Not Impact Strong Performance by South West Hoteliers in 2015

November marked the first month in which hotels in the South West region have recorded a year-on-year decline in profit in 2015.

The 0.8% drop in GOPPAR this month, to £26.10 from £26.31 during the same period in 2014, will not impact the overall profit performance for 2015, which is set to increase by double figures this year on the back of a 12.6% year-on-year profit increase in 2014. However, the drop was as a result of a notable year-on-year increase in labour (+2.5%) and overhead (+5.9%) costs.

Whilst the South West region undoubtedly remains in a purple patch, the trend of year-on-year cost increases has been noted throughout 2015, but is more prevalent in November as growth has slowed. The most concerning increases in year-to-date costs have been recorded in Rooms Cost of Sales (+21.8%) and Sales & Marketing Expenses (+20.7%), which should be managed to ensure South West hotels remain profitable.

Profit Levels at Country House Hotels Going From Strength to Strength

The UK's rurally located hotels are keeping up with, and in many cases exceeding, the performance of their urban colleagues as illustrated by the year-to-date GOPPAR increase of 11.8% for the 11 months to November 2015.

In addition to benefiting from a return to good levels of disposable income fuelling the ongoing recovery in the leisure segment, many country house hotels have significant meeting and event facilities and are also benefiting from the revival in this segment. This is exemplified by the increase in the proportion of demand from the residential conference segment, to 19% of total demand in the 11 months to November 2015 from 18.1% during the same period in 2014, as overall occupancy has increased by 2.7 percentage points. This is coupled with a 3.5% increase in the achieved rate in this segment, to £94.31, the highest yielding segment.

Country house hoteliers appear to have a good grasp of costs levels, having worked hard to convert a 4.7% year-on-year increase in TrevPAR to an 11.8% increase in GOPPAR in the 11 months to November 2015. This is on the back of a 9.6% year-on-year profit increase in 2014.

Media Contact

Sita Banigo

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