2011 will be year of stability for UK hotels, says TRI

Data from TRI Hospitaltiy Consulting’s HotStats database reveals that the London hotel market will go “from strength to strength” in 2011.  Growth in provincial hotels, on the other hand, will be constrained next year due to continuing tough market conditions, but the falling profitability of the last two years is expected to flatten out.

"Despite some dire forecasts at the start of this recession, the UK hotel industry has proved itself resilient with London exhibiting extraordinary strength. Even though the recovery remains uncertain we expect hotels across the country to show stability and be poised for modest growth next year" said Jonathan Langston, managing director of TRI.

Provincial hotels​

Disruptions to trade in the first part of this year as a result of severe weather conditions posed significant obstacles to provincial hoteliers, but the market has remained relatively stable since May 2010.

Revenue per available room (RevPAR) picked up slightly as a result of higher volumes, although moving forward overall profit is expected to decline by just under 3 per cent.  This decline is expected to continue “for some time” as both corporate and leisure budgets remain tight.

In 2011, TRI forecasts that there will be no growth in occupancy and average room rate in the provincial market.

“2011 will be a year for provincial hotels to stabilise financial performance amidst continued challenging market conditions,” said Langston.

Full-service hotels are also likely to face increasing competition from the budget sector, and will be forced to further reduce tariffs to protect volume.

On the more positive side, TRI expects some modest growth in midweek demand.

London hotels​

The picture in London continues to be much more optimistic, with the sector described as “robust”, and growth in revenue and profits expected to continue.

Next year, the London hotel market is forecast to continue to increase occupancy by one percentage point and average room rate performance by 2.2 per cent.

“In 2010, London hoteliers responded rapidly to the increase in corporate demand from the low point of 2009. The corporate market commands a superior sector rate to the leisure market, and we are seeing London full-service hoteliers shed lower-rated leisure business, a market which was relied upon to replace the loss in commercial demand in 2009, as rack and corporate demand continues to grow,” said Langston.

“We expect London hotels to continue their strategy of attracting a greater proportion of higher rated commercial demand although the rate of growth in demand from this sector will inevitably be lower than the considerable growth achieved in 2010 performance. Given the fact that hoteliers appear to be operating at optimal efficiency and towards capacity occupancies, any increase in RevPAR performance will continue to drop down to gross operating profit, as experienced in 2010.”