London hotels recover from Royal Wedding let-down

Published by TRI Hospitality, the latest survey reveals that year-on-year profitability levels at London hotels increased by almost 17 per cent in May this year.

Business during the month was boosted by events including the state visit by the US President Barack Obama, the Chelsea Flower Show and the Champions League Final at Wembley.

Average room rates increased by over 14 per cent to £112.93 from £99.01 in 2010.

‘Exceptional’ growth​

“The performance of the London hotel market is becoming more and more difficult to predict,” said Jonathan Langston, managing director, TRI Hospitality Consulting.

“Following the 10.7 per cent year-on-year growth in profit per room in the capital in May 2010, it was difficult to conceive that the market would once again record such an exceptional level of growth."

Gross Operating Profit per Available Room (GOPPAR) at London hotels increased by 16.9 per cent to £77.49 during May, which is equivalent to a profit conversion of around 50 per cent of total revenue.

Provincial hotels​

This growth in the London market come against a backdrop of a struggling provincial hotel market, where profits are forecast to decline for the year​.

"The economy of London and strength of the hotel market appears undeterred by happenings not only in the rest of the UK, but across Europe and the world,” said Langston.

However, secondary sources of income – such as food and beverage and meeting room revenue – were “more measured” during the month. In addition to this, marketing and maintenance costs increased across the country.

“Hoteliers and other observers often regard RevPAR as the most important indicator of the health of the industry and May’s result could be interpreted as a positive. But with profitability continuing its decline in the provinces it would be folly to consider any other measure than GOPPAR as the pulse check of the hotel sector,” said Langston.