The Capital Gains As Retail Booms - UK Chain Hotels Market Review – May 2010

Following the disappointing performance for hoteliers across the UK in April, last month saw a return to profit growth. London hoteliers recorded the highest room occupancy of 2010 at 83.1%. The increase in volume was led by tourists from France, China and the Middle East who took advantage of the weather and the favourable pound to visit the capital, said the British Retail Consortium. This resulted in an 11.6% increase in year-on-year retail sales across London.

Headline performance levels in the London hotel market made a return to the strong display of the first quarter of 2010 with a 6.6% increase in achieved average room rate, to £119.06, helping to boost Revenue per Available Room (RevPAR) levels by nine per cent. Due to a 10.7% increase in gross operating profit per available room (GOPPAR), profitability levels in May were close to 7% above the rolling 12 month average. 

“After the uncertainty of April, London hoteliers will undoubtedly have enjoyed a return to profits growth. It is imperative that hotels in the capital avoid any further disruption to performance and concentrate on maximising the opportunity associated with the international leisure sector during the summer period”, said David Bailey deputy managing director, TRI Hospitality Consulting.

Provincial profitability grows for the first time in 2010 

With an increase of 2.2% to £31.93 per available room, May was the first month of the calendar year in which provincial hoteliers experienced a growth in profitability, according to the latest HotStats survey from TRI Hospitality Consulting.  

Hotels in the Provinces have struggled to gain momentum in 2010, primarily due to events beyond their control. However, the month of May provided some respite from the dour and frustrating first four months of the year. The 5.3% increase in RevPAR not only represented the greatest margin of increase for more than two years, but was the first time provincial hoteliers have experienced any increase in RevPAR since July 2008 

The growth in RevPAR was driven by a 2.8 percentage point growth in room occupancy (to 72.6%) and a 1.2% increase in average room rate to £69.59.  

May is typically a strong corporate month and the growth in headline performance levels was assisted by a 2.7% increase in demand attributed to the high-yielding corporate sector, which is compared to a 3.5% decline during the same month in 2009. 

Although average room rate in the provinces remains under considerable pressure in the corporate sector, major markets across the UK saw signs of business roomnights returning with growth in volume in the corporate sector in Leeds (4.9%), Nottingham (2%) and Liverpool (4.2%). That said, corporate rates across the provincial UK remain 3.1% below the 2009 level, at £68.59.

“When comparing the rolling 12 months to May 2010 against 2009, provincial hotel performance remains some way behind. However, the growth in May has put the provinces firmly on the road to recovery,” added Bailey.

Heathrow hoteliers thrive as BAA face further set backs

The loss in passenger numbers attributed to the volcanic ash cloud and British Airways industrial action at Heathrow Airport in May was estimated at 320,000 passengers, equivalent to six per cent of all traffic. 

Despite the decline in passenger numbers at the UK’s largest airport, average room occupancy in the Heathrow hotel market increased by close to ten per cent in May to 82.7% as hoteliers in the area accommodated stranded travellers. In line with the benefits afforded to its hoteliers following last month’s disruption, growth in average room rate in the Heathrow hotel market increased by 3.3% driving RevPAR growth of 16.8% (to £58.42) for the month of May, according to the latest HotStats survey.

BAA estimates that the loss in passenger numbers across the group in May was 445,000. The decline was more acutely felt at airports in Scotland where the ash cloud loitered for a longer period than at airports in the south. The year-on-year decline in passenger numbers handled at BAA operated airports as a result of the disruption in May were estimated to be 2% at Stansted, 3% at Southampton and 6% at both Glasgow and Edinburgh. 

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TRI Hospitality Consulting provides a wide range of services to clients in the hotel sector. It has offices in London, Dubai and Madrid.

For more information contact:

Jonathan Langston, managing director 020 7892 2201

[email protected]

David Bailey, deputy managing director 020 7892 2202

[email protected]

Charles Scudamore, director 0207 892 2211

[email protected]