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London Hotels Lose out in July but the Seeds Are Sown for a Bright Future

2012-08-28

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TRI Hospitality Consulting UK Chain Hotels Market Review - July 2012

It was an inevitable consequence of the capital hosting ‘the greatest show on earth’ that headline performance levels would see a dip, and with record occupancies achieved during the same period in 2011, the results were never going to be pretty this month, according to the latest HotStats survey of approximately 560 full-service hotels across the UK by TRI Hospitality Consulting.

Despite the 6.3% year-on-year increase in achieved average room rate in July, to £159.26 from £149.80, the year-on-year movement in Revenue per Available Room (RevPAR) was negatively impacted due to a 10.2 percentage point decline in room occupancy.

Somewhat surprisingly, the decline in demand in London was not in the commercial sectors as initially predicted, but due to a drop in the proportion of demand attributed to the leisure and group tour sectors, which declined to a cumulative 29.8% of total demand from 39.5% of demand during the same period in 2011 as tourists stayed away.

Whilst this may in part be due to the particularly high visitor numbers in July 2011 as a result of the timing of Ramadan, travel companies clearly, and understandably, shifted their focus to selling high-yielding Olympic-related tours this summer, as the rate in this sector increased by 57.4% to £153.82, despite the drop in volume in the group segment.

“Host cities have proved time and time again that the biggest international events, such as the Olympics and football World Cup, rarely pay off for hoteliers during the period of the event and London is no exception.

However, it is important for London hoteliers to put July’s performance into context rather than licking their wounds, as most other cities across the UK and Europe would consider a room occupancy close to 82 per cent and a 6.3% increase in room rate to be a hugely successful month,” said Jonathan Langston, managing director at TRI.

Demand attracted to the biennial Farnborough Air Show was not enough to offset the inevitable decline in volume from the highs of 2011, which contributed to a 2.3% decline in Total Revenue per Available Room (TRevPAR) to £171.16 as hoteliers in the capital also suffered a 5.1% year-on-year drop in food and beverage revenue to £24.58 per available room.

As a result of the movement in revenue and costs, Gross Operating Profit per Available Room (GOPPAR) for the month dropped by 3.1% to £91.79, which many will consider to be a small price to pay for what will undoubtedly be a reinvigoration of London’s tourism industry.

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