UK Chain Hotels Market Review | February 2008 | TRI Hospitality Reports
No crunch on London profits
Despite the continuing turmoil in the financial markets London’s chain hoteliers enjoyed a doubledigit rise in profit during February thanks to continuing increases in room rates, according to the latest HotStats survey from TRI Hospitality Consulting.
Income before fixed charges (also known as gross operating profit) increased by 11.7 per cent in London to reach £57.74 per available room, compared to the same month a year earlier. Occupancy increased slightly, up 0.6 percentage points to 78.5 per cent, but it was the continued push on room rates that was the principal facilitator of improved profitability. Average achieved room rate increased by seven per cent to £114.54
“Given that the credit crunch started at least six months ago and visitor arrivals continue to fall, the London hotel market appears to be bearing up remarkably well. But the signs of a slowing economy are present and London’s hoteliers already face a challenging environment,” said David Bailey, deputy managing director, TRI Hospitality Consulting.
Profit growth steady in the Provinces
In the rest of the UK (referred to as the provinces) profit growth stood at 2.5 per cent with IBFC increasing to £28.08 per available room. With occupancy dropping marginally by 0.4 points to 68.8 per cent, profit growth was, again, the direct result of an increase in average room rate also up by 2.5 per cent to £72.74.
After staying flat in January, February’s rise in profit was just ahead of the consensus forecast of inflation (2.2 per cent) as published by HM Treasury. Overall, provincial hotel performance looked reasonably steady but inevitably some markets performed better than others.
TRI’s unique full profit-and-loss sample of 522 full-service hotels across the UK showed double digit profit growth in Oxford and Cambridge, but drops in profit in Birmingham, Edinburgh and Manchester.
“In a more challenging economic environment there will be winners and losers. In February at a micro-level we know that the Oxford market benefited from an increase in public sector meetings revenue and Cambridge bucked the general trend of flat occupancy with a 9.8 percentage point rise to 76.9 per cent. One Cambridge hotelier reported a spate of last-minute weddings,” said Bailey.
Visitor arrivals data not encouraging
UKinbound, the official trade body representing the inbound tourism industry, found in its monthly survey that visitor arrivals were 3.9 per cent lower in January than in the same month a year earlier. Forward bookings were also down, by 2.6 per cent.
The organisation commented that current global economic instability was resulting in lower demand for tourism products and in such conditions price was king. In this regard the UK had an upward struggle due to its high prices which were driven by high operating costs and taxes, it said.
Airports operator BAA said that total traffic at its seven UK airports, which include Heathrow, Gatwick and Stansted, was up by 3.5 per cent on the same month last year.
However a like-for-like comparison showed that traffic during the first 28 days of the month (ie. ignoring the extra leap year day) was down by 0.5 per cent on last February.
European scheduled traffic was up by just 0.1 per cent while European Charters rose by 1.5 per cent. North Atlantic activity was 1.1 per cent lower, while traffic on other long haul routes was, in aggregate, up by 1.0 per cent.