Demand for hotels in the U.K. hotel market was weaker in August due to seasonal trends compared to July, a recent study by Knight Frank has revealed.
According to Knight Frank’s latest U.K. Hotel Dashboard, which focuses on the performance of select-service hotels in London and the regional U.K., operational YOY performance was strong in terms of both revenue and profits.
Occupancy among hotels in London touched 81.65 in August, up 7.9 percentage points from August 2022, with a more moderate ADR growth of 2.6%.
Recovery in international demand for hotels helped push demand in the U.K. as well, with international arrivals at Heathrow Airport 24% higher than in August 2022. Occupancy, however, remains four percentage points below August 2019 levels.
LONDON’S PERFORMANCE
With demand improving, London’s occupancy has touched nearly 77% in August, about 14 percentage points more than August YTD 2022. Close to 1,800 new hotel rooms were added to London’s hotel supply since the start of the year.
GOPPAR saw robust growth through August, rising 17% from August 2022. In the August YTD period, GOPPAR reached £90 ($110.31), increasing by 28% compared to YTD 2022 and is ahead of the YTD 2019 performance by 2.8%.
In terms of occupancy, select-service hotels in London outperformed the wider London market, touching 84% in August. However, it still lags behind its pre-pandemic performance. Transient room revenue represented 93% of the revenue mix. YOY, transient room rates rose by 9.6% YTD 2023 and are 28% higher than YTD 2019.
RevPAR was up 24% compared to YTD 2019. The robust top-line performance saw a strong rise in GOPPAR, up by 33% compared to August YTD relative to 2022 and 9% more than YTD 2019.
However, profit margins remained considerably lower at 47% YTD 2023 against 53% YTD 2019.
Utility costs jumped 40% PAR compared to August YTD compared to the same period in 2022 but with costs increasing by 15% POR.
REGIONAL U.K.
August was an impressive month for regional U.K. trading results, with a monthly gain of 5.4% in ADR, the primary driver behind YOY RevPAR growth of 6.7%. In real terms, ADR was up 4.1% from August 2019.
In August YTD, RevPAR grew by 20% ahead of YTD 2019, boosting income generated from the rooms department by 19% over the same period. However, trading was more challenging in the F&B segment, with F&B departmental income dipping 18% over the same period.
GOPPAR rose 4.6% YOY in August, while monthly profits were ahead of August 2019. At £34 ($41.67), August YTD GOPPAR was up by nearly 10% from YTD 2022 and YTD 2019.
Select service hotels in the regional U.K. outdid all hotel segments, with GOPPAR soaring ahead of its YTD 2022 performance by 25% and improved by 31% from YTD 2019.
Despite the challenging cost environment, robust revenue growth, with RevPAR up by 27% from YTD 2019, has driven GOPPAR growth. The YTD margin of 35% is on par with 2019.
Total payroll costs were 14% higher than August 2022. Meanwhile, utility costs surged 27% PAR YOY in the same period.