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Strong Start to the Year for Hotels in The UK's North West As Profit Soars

Column: industry Tag: UK Hotel,Hotel in UK Published: 2017-03-10 11:51 Source: Author:

Strong Start to the Year for Hotels in The UK

Hotels in the North West recorded a 12.2% increase in profit per room in January, led by a 9.2% increase in RevPAR, as the region enjoyed a great start to 2017 according to the latest data from HotStats.

Growth in both room occupancy (+4.1 percentage points) and achieved average room rate (+2.4%) contributed to the ongoing increase in RevPAR (Revenue per Available Room), which has now grown by 20.5% over the last 36 months, to £61.58 in the 12 months to January 2017.

The year-on-year increase in achieved average room rate was driven by growth recorded in residential conference (+6.5%) and corporate (+5.3%) segment rates, as strong midweek demand levels have allowed commercial rates to be leveraged in the key North West cities of Manchester and Liverpool.

The strong performance at hotels in the North West contributed to the 6.2% RevPAR increase at hotels in the Provincial UK in January, as well as the 6.5% GOPPAR (Gross Operating Profit per Available Room) increase to £15.06 per available room during the same period.

Aberdeen Facing Fresh Challenges as Profit Continues to Tumble

Following declines in profit per room in 2015 (-33.3%) and 2016 (- 51.5%), a 41.0% year-on-year decline in profit per room in January suggests there is further woe to come for hotels in Aberdeen, as supply increase provide fresh challenges to trading performance.

Many hotel projects in the city were already underway when the oil crisis hit Aberdeen in 2014, and have come to fruition within the last 24 months, including the 165-bedroom Crowne Plaza, 155-bedroom Hampton by Hilton, 200-bedroom Moxy and 193- bedroom Holiday Inn Express. Although these schemes are all clustered at the airport, and in proximity to the AECC, the impact on performance will undoubtedly be felt across the city.

Whilst hotels in Aberdeen were able to claw back occupancy this month, increasing by 1.5 percentage points year-on-year, to a lowly 54.4%, RevPAR at hotels in the city fell by 14.9% as a result of a 17.2% drop in achieved average room rate, to £63.52.

Once the lifeblood of hotels in Aberdeen, commercial demand now comprises just 32.1% of total demand in the 12 months to January 2017, having dropped from 46.2% in the 12 months to January 2016. For the average hotel in Aberdeen, this is equivalent to a drop of approximately 7,800 accommodated commercial roomnights per annum.

RevPAR Grows But Profit Drops in Bristol

Hotels in Bristol recorded a 12.5% decline in profit per room in January 2017, which was in spite of a 2.0% increase in RevPAR led by a 1.3 percentage point increase in room occupancy.

Hotels in the South West city have performed well in recent years, illustrated by the 2.6% increase in GOPPAR in the 12 months to January 2017, which was on the back of a 1.0% increase in RevPAR, suggesting that astute hoteliers are converting revenue to profit effectively.

However, this month hotels in Bristol suffered declines in Non- Rooms Revenues, including Food and Beverage (-12.1%) and Conference and Banqueting (-19.2%) on a per available room basis.

In addition, an increase was also recorded in Payroll (+1.7 percentage points) to 37.4% of total revenue, which contributed to a 6.7% decline in Departmental Operating Profit, to £39.57, equivalent to 50.6% of total revenue.

Whilst high operational costs are undoubtedly a challenge to manage at this time of year due to lower occupancy levels, evidence suggests there is also a widening chasm between RevPAR and other key metrics lending further weight to the argument that the industry’s key performance indicator is no longer the best, single measure of the health of the hotel sector.

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