Capital comeback: London hotels outperform Provinces in June

This time last year, the Queen’s Diamond Jubilee and the Olympics ‘ghost town’ phenomenon led to revenue and profit declines in the capital.

But successful revenue management enabled London hotels to outperform their regional counterparts for only the second time this year in June. According to the HotStats survey of around 625 full-service UK chain hotels, occupancy was back up to 2011 levels at 88.9 per cent, while average room rate increased by 3.9 per cent year-on-year, to £163.29.

Additional revenue per available room of £3.27 derived from food (up 7.5 per cent) and beverage (up 9.6 per cent) sales and meeting room rental (up 15.0 per cent) led to a total revenue growth of £19.16 per available room. June 2013’s performance boosted the calendar year to date TrevPar up from £147.51 in May to £155.67 in June.

And, according to business advisory and accountancy firm BDO, a 2 per cent year-on-year reduction in room rate to £143.79 - compared with £146.75 in June 2012 - was more than offset by a 6.3 per cent increase in occupancy from 82.6 per cent to 87.9 per cent. The result was a 4.2 per cent rise in rooms yield from £121.33 to £126.36.

HotStats, which is no longer associated with TRI Hospitality Consulting in the UK, says the major drivers of this profitability boost were ‘lower payroll levels than last year and a decline in travel agent commission paid’.

Provincial positivity​ 

Meanwhile, hotels in the Provinces recorded a positive second quarter thanks to a third successive month of profit growth – although, as is the case with London,  the positive year-on-year performance in June was partly a result of weak performance last year.

The HostStats results show that, for the calendar year, occupancy increased by 1.5 per cent to 68.6 per cent, while ARR for the first half of the year increased by 1.7 per cent to £69.42. Consequently, RevPar in provincial hotels rose by 3.9 per cent compared with the first half of 2012. A Growth in food (2.3 per cent) and beverage revenues (1.3 per cent) as well as leisure revenues (+4.2 per cent) helped to increase total revenues per available room by 3.1 per cent.

BDO’s figures display room rate remained unchanged at £62.77, while occupancy improved by 2.4 per cent to 76.8 per cent.  Rooms yield consequently rose by 2.4 per cent to £48.21, compared with £47.07 12 months ago.

Regional hotels posted the strongest performance for the first six months of the year as whole: comparing January – June 2013 with the same period last year, rooms yield increased by 2.0 per cent in the regions but fell by 2.7 per cent in the capital.

Back in black​

Commenting on the figures, Robert Barnard, a partner at BDO, said: “This is a strong performance all around, especially in London.  Operators are skilfully using selective price discounting to contribute to top line growth at a time when the operating environment is beginning to show signs of improvement.

“Regional hotels will be particularly pleased with their results for the first half of the year.  A combination of strong management and lack of new hotel openings has enabled operators in the regions to buck the trend we’ve seen in recent years and outperform their London counterparts.  To have achieved this at a time when the MICE remains in the doldrums is all the more impressive.

“We expect regional hotels to remain in the black for the rest of the year provided that consumer and business confidence continues its upward trajectory.  London’s performance may suffer from unfavourable comparisons with last year’s Olympics-inspired success, but the city’s fundamentals are likely to remain sound for the remainder of 2013.”