HotStats UK Chain Hotels Market Review – May 2016

The 2.6 % year-on-year increase in profit per room this month contributed to a 3.4% year-to-date uplift and the ongoing positive story of bottom line growth at hotels in the South West, according to the latest data from HotStats. The South West has been one of the strongest performing regions in recent years, with profit per room increasing by 36.9% in the last 36 months, to £31.24 in the 12 months to May 2016 from £22.82 in the 12 months to June 2013.

Whilst the uplift in profit per room has primarily been driven by steady growth in total revenue, recorded at 4.4% in the 12 months to May 2016 to £100.69, and supported by astute cost management, South West hoteliers should be wary of the ever-increasing cost of labour, which has grown by 4.2% year-on-year for the month of May to £31.85 per available room, equivalent to 31.6% of total revenue.

Commercial Segment Fuelling Strong Profit Growth for Leeds Hoteliers

Hotels in Leeds recorded a 5.3% increase in RevPAR (Revenue per Available Room) for the month of May driven by a 4.3% increase in achieved average room rate, which was well ahead of the growth in this measure for the Provincial UK as a whole at 2.3%.

The corporate sector in the city remains strong, recording an uplift in volume as well as a 6.2% year-on-year segment rate increase in May, to £75.56. The growth this month contributed to the 15.6% rate increase in the corporate segment over the last three years, to £71.92 in the 12 months to May 2016 from £62.17 in the 12 months to June 2013.

Despite a decline this month, growth in the residential conference segment has also been achieved, recording a 20.8% increase in the last 36 months, to £83.00 in the 12 months to May 2016 from £68.71 in the 12 months to June 2013.

In addition, a 5.6% year-to-date increase in Conference and Banqueting spend on a per available room basis contributed to the 4.8% growth in total revenue recorded at Leeds hotels in the five months to May 2016, further exemplifying the current strength of the commercial segment in the city.

Buoyed by business-related demand, year-to-date profit per room at hotels in Leeds has increased by 14.0%, to £32.28 from £28.32 during the same period in 2015.

Profit Performance at Glasgow Hotels Hit by Falling Revenue and Rising Labour Costs

Profit per room at hotels in Glasgow declined by 8.4% in May, as the impact of a 3.2% fall in TrevPAR (Total Revenue per Available Room) was further exacerbated by a 3.1% increase in payroll levels on a per available room basis.

RevPAR for the month was down by 3.6% year-on-year to £65.48 from £67.89 during the same period in 2015 and top line performance has undoubtedly been impacted by additions to supply which have been developed on the back of recent robust market conditions. The addition of 563 bedrooms across 2015 and so far in 2016 will potentially challenge top line performance, particularly as 64.0% of new bedrooms are operating in the budget segment.

On a rolling 12-month average basis, profit per room has been on the decline since peaking at £42.32 in June 2015 and has fallen to £38.47 in the 12 months to May 2016. Despite this, Glasgow hotels are in a positive profit position, remaining 30.0% above the low of £29.67 recorded in the 12 months to July 2013. Whilst recent revenue declines have been measured, a simultaneous increase in costs has resulted in a more severe fall in profit per room, illustrated by the 8.4% profit drop this month on the back of a 1.8 percentage point increase in payroll as a proportion of total revenue, to 29.6% from 27.8% during the same period in 2015.