London hoteliers undone by Jubilee celebrations and Olympic anxiety, Provincial performance also a washout

31-Jul-2012 - Last updated on 11-Sep-2024 at 13:28 GMT

Profit per room across the capital’s hotels declined by 9.3 per cent in June, while the 5 per cent decline for Provincial hotels was not an unfamiliar trend in 2012

Hotels in London recorded the worst financial performance of 2012 in June, with the extended holiday for the Queen’s Diamond Jubilee combined with Government warnings of transport disruption and fears over accommodation pricing before the Olympics leading to a detrimental decline in business.

Profit per room across the capital’s hotels declined by 9.3 per cent in June to £85.87, while Total Revenue per Available Room (TrevPAR) fell by 5 per cent to £165.83, on the back of a 5.7 per cent decline in room occupancy to 83.3 per cent.

“Although the Jubilee festivities enabled London to look busy in June, the city was primarily filled with day visitors with everyone else choosing to escape to the country or overindulging on street party tea and scones,” said David Bailey, deputy managing director at TRI Hospitality Consulting, which conducts the monthly HotStats UK Chain Hotels Market Review of approximately 560 full-service hotels across the UK.

“Among the doom mongering brought about by the decline in headline performance levels, we must remember that at a room occupancy of 83.3 per cent and an achieved average room rate of £148.18, the performance in June was well ahead of the year-to-date stats for London and remains very strong.”

Although the 0.8 per cent drop in achieved average room rate for London hotels in June was minimal, it represented the first time in 32 months that this measure suffered a drop, to £148.18 from £149.34.

The drop in revenue was further exacerbated by a 2.1 per cent increase in payroll costs per available room to £35.99, contributing to a 1.5 per cent rise in payroll to 21.7 per cent of total revenue.

The 2.1 percentage point increase in demand from the leisure sector, driven in part by the first week’s play at Wimbledon, was not enough to offset the decline in business demand due to the double bank holiday over the Diamond Jubilee, which had a similar effect on London hotel performance as the Royal Wedding in April 2011,and recent pre-Olympic travel anxieties.

Provincial performance

Meanwhile, hotels in the Provinces also suffered a decline across all measures in June as volume in the business segment was hit by the extended Jubilee bank holiday and price in the leisure sector softened as the rain fell relentlessly,

While the 5 per cent decline in profit per room for Provincial hotels was not an unfamiliar trend in 2012,hotels in the regions struggled to increase RevPAR in June as they have successfully done so in most other months.

“Provincial hoteliers just can’t seem to catch a break at the moment,” added Bailey. “The poor weather has caused events that would usually drive the demand for hotel accommodation to be cancelled across the country, such as the North Yorkshire County Show, the CLA Game Fair at Grantham and the Godiva Festival in Coventry.

“And although the ONS is reporting year-to-date inflation levels declining to 2.4 per cent, which is good news for food costs, a lack of rain in the US and too much rain in the UK is threatening to put upward pressure back on to food prices in the medium term.”

Although achieved average room rate remained comparatively stable, hotels in the Provinces suffered a drop in the proportion of demand attributed to the corporate (-3.6 per cent) and residential conference (-0.6 per cent) sectors to a cumulative total of 37.5 per cent of total demand, which is low for June.

Additionally, as the popularity of ‘staycations’,which have supported Provincial hoteliers so favourably since the onset of the current economic downturn, continues to wane due to the terrible weather and strengthening sterling, hoteliers are dropping rates, exemplified by a 2.7 per cent decline in achieved rate in the leisure sector in June.

Provincial hoteliers are also relying more and more heavily on support from third-party websites to drive leisure demand into their hotel, with this measure increasing by 11.4 per cent on a per-room-let basis in June, to £4.61, equivalent to 6.4 per cent of rooms revenue.

Added to other deductions related to ‘direct rooms expenses’, this resulted in an achieved net average room rate of £61.46 for June, against £62.53 during the same period in 2011.

Profit per room in the Provinces has now declined by 5.1 per cent in the first half of 2012 to £22.94 from £24.16 during the same period in 2011.