London hotel performance continues improving, led by upper end

UNITED KINGDOM The hotel industry in London continued its improvement in January, although growth slowed a bit compared to recent months.

While London hotels posted a RevPAR increase of 3.3% during the month, gross operating profit per available room (GOPPAR) remained stable, according to the latest HotStats survey from TRI Hospitality Consulting. ADR increased by 8.8% in London, even as occupancy decreased by 3.6 percentage points.

“After the strong bounce-back in 2010, it was almost inevitable that London hotels’ profit performance would be subdued in what is usually a tough trading month for hotels,” says TRI Managing Director Jonathan Langston. “It will be interesting to see if this continues throughout the year on the back of an excellent 2010 in London.”

RevPAR for the 3- and 4-star segments improved by 2.3% and 1.7%, respectively, but both were outperformed by the city’s 5-star hotels, which gained 3.7%.

Heathrow Airport recorded its highest January passenger figures since 2006, supported by growth in China and India routes. The airport handled 7.5 million passengers, an increase of 3.8%.

In the UK provinces, hoteliers achieved a marginal 2.9% increase in RevPAR, although GOPPAR performance continues to decline against figures for January. Provincial hotel market profit performance declined for the fourth month in a row, as January showed a decrease of 3.6% in profit performance.

“When examining provincial market performance, it is clear that the domestic traveler is reducing discretionary spend to the detriment of hotel trading performance,” Langston says. “In January 2010, the provinces had to deal with adverse weather conditions. This year, an increase in VAT and inflation has resulted in cutbacks in consumer spend.

“With much of the cost saving strategies implemented last year, provincial hoteliers are now reliant on a pick-up in market conditions. It is inappropriate to call a year on the basis of January numbers, and it will be interesting to see how provincial performance evolves in what could be a bumpy 2011.”