RevPAR gains belie troublesome October for UK hoteliers

UNITED KINGDOM Growth in RevPAR during October masked the reality of hotels in the UK provinces, which suffered the biggest drop in year-on-year profitability levels since January.

Despite a 1.6% increase in RevPAR to £51.60, the latest HotStats survey from TRI Hospitality Consulting shows that gross operating profit per available room (GOPPAR) actually fell back by 4.1% for provincial hoteliers during October, to £32.89. This is the greatest margin of decline since the 18.9% drop at the beginning of the year.

Although price and volume continue showing signs of recovery from the declines experienced this time last year, ancillary spend in the provinces has dropped further this month, resulting in a 0.5% decline in total revenue per available room (TRevPAR) to £98.43.

Once again, an increase in payroll levels was partly to blame for further declines in profitability, TRI says. However, it was not all doom and gloom across the provinces, as visitors to the Ryder Cup helped to boost profitability for hotels throughout Wales and South West England.

The golf tournament was a welcome respite for Cardiff hoteliers, as profitability levels increased by 13.3% on the back of a 13.9% increase in RevPAR. As a result, the achieved GOPPAR for hotels in Cardiff during October (£44.08) was significantly above the provincial hotel market (£32.89).

According to leading Cardiff hoteliers, 2010 has, in general, been a tough year and remains challenging, with fewer major events in the city than normal and little or no large city conferences. Making the situation worse is that new supply continues to materialize. The outlook for 2011 is gloomy, business confidence remains low and the additional impact of any public sector cuts will be felt next year.

Profitability in London buoyed by robust business sector

The outlook is considerably different in London, where GOPPAR grew by 16% in October as the commercial sector continued to show signs of significant improvement. Hoteliers in the UK capital have successfully increased demand volume in this segment, as well as growing achieved rate by more than 8%, to £153.62. This is in addition to growth of approximately 16% in the achieved rate in the conference sector, to £141.83.

Robust demand in the business sector and a strong showing from the leisure sector helped London hoteliers to once again record the second highest occupancy levels of the year, and subsequently boost achieved TRevPAR levels to approximately 17% above the year-to-date average at £164.64.

“Following the levels achieved during this month in 2009, it did not seem conceivable in the current environment that room occupancy in London could grow any further, yet the return of the business visitor has allowed hoteliers in the city to boost midweek volume,” says David Bailey, deputy managing director of TRI Hospitality Consulting. “And while leisure demand remains strong, we recognize that months such as this, when occupancy reaches 87.8%, represent a high-water mark for room occupancy levels in the capital.”