UK Chain Hotels Market Review | October 2009

In addition to demand created by visitors to the capital attracted by the ongoing strength of the Euro against the Pound and the long-forgotten ‘Indian Summer’, room occupancy levels in London in October were boosted by a catalogue of major events including the 53rd Film Festival.

The staggering London room occupancy, as well as a year-on-year decrease in average room rate of less than five per cent, helped to reduce the margin of decline in Revenue Per Available Room (RevPAR) to its lowest level since July 2008, at only 3.2%.

“Although we are dealing with softer comparables in the fourth quarter of 2008, the continued improvements in headline performance in London are encouraging,” said Jonathan Langston, managing director, TRI Hospitality Consulting.

London also showed continuing signs of improvement in the profitability of its hotels. Despite hoteliers struggling to manage payroll costs as effectively as in September 2009, the year-onyear margin of decline in Gross Operating Profit per available room (GOP PAR) was reduced to 4.5% for the month of October.

Decline in business travellers confirmed by IPS

Following an occupancy of 75.7% in September 2009, a room occupancy of approximately 73.6% in October continued a strong autumnal period for hoteliers in the UK provinces. In addition, provincial average room rate in the month of October 2009 experienced its smallest margin of decline (7.6%) since the beginning of the year to £69.29, from £74.95 in 2008.

However, the rate gap remains an issue and may be primarily attributed to the continued decline in the number of high-yielding business travellers to the UK. According to VisitBritain, using data from the latest International Passenger Survey, of the eight per cent fewer visitors to the UK, inbound business travel was down by 23% in the nine months to September 2009. In contrast, the number of lower yielding inbound leisure visitors increased by three per cent during the same period.

In the nine months to September 2009, figures from VisitBritain show that outbound visits by UK residents were down by 15% compared to the same period in 2008. It is clear that the appetite for domestic autumnal short breaks remains as provincial occupancy levels in October have been boosted by primary tourism locations such as Bath (+6.5%), Brighton (+4.1%) and Plymouth (+5.8%).

According to the latest HotStats survey, this is helping the provincial UK hotel market to reduce the year-on-year margin of GOP PAR decline with a decrease of 10.5% in October. This is compared to a difference of -14.3% in September 2009.

“UK hoteliers have sacrificed room rate whilst successfully managing volume and costs and as a result, provincial GOP PAR declines are the lowest they have been since September 2008,” added Langston.

Having experienced a slight decline in September 2009, key UK airports returned to a period of growth in passenger numbers in October. This was led by a 1% year-on-year increase in passenger numbers at Heathrow and a 1.8% growth at Gatwick.

In contrast, a 40% cutback in the capacity of their winter programme by Ryanair has been the primary contributor to a 10.1% decline in passenger numbers at Stansted Airport, as the overall capacity of the airport was reduced by 11.7 %. Conversely, the low cost carrier announced this month that it will launch ten new routes from Bristol, Liverpool, Edinburgh and Glasgow in February 2010.

Following a 3.8% year on year increase in passenger numbers in October 2009, Edinburgh remains the only airport in the UK which has experienced growth (0.9 %) in passenger numbers in 2009. Scotland’s primary airport handled approximately 825,000 passengers in October 2009, compared to approximately 794,000 in October 2008. Key UK airports return to growth

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