Andersen Hotel Industry Benchmark Survey

11/19/2001  

Capital Punishment Continues Unabated as Regional UK Occupancy Exceeds London

Andersen today released the first market data for London and the UK for the month of October. Preliminary data from the Andersen Hotel Industry Benchmark Survey for London indicates that trading conditions in October were very difficult, as predicted.  Most pundits had anticipated that October performance would be more challenging than September, which included 10 days of 'good' trading before the events of September 11, however, few could have predicted the impact would be so harsh.  London witnessed a fall in market occupancy of 22.5 percent over the same period in 2000, whilst average room rates (that until July had been on the rise) fell 13 percent. This resulted in a massive 32.6 percent fall in revPAR.

The regional UK market fared demonstrably better with the fall in occupancy limited to 5.4 percent and the decline in average room rate to 3.7 percent compared to the same month last year.  Consequently the revPAR decline was limited to 8.9 percent.  Overall, regional UK hotels reported October occupancy of 73 percent compared to 66.5 percent for London.  This is the first time since the launch of the Andersen Hotel Industry Benchmark Survey (January 1996) that occupancy levels in regional UK hotels have been ahead of London.  This phenomenon looks set to continue as the British consumer opts for domestic vacations rather than a trip abroad.  A recent survey by the English Tourism Council reports that 'nearly one million people in the UK have changed their plans (since September 11) for holidaying abroad to taking trips at home'.

Performance of London and Regional UK Hotels – October 2001

Source:  Andersen Hotel Industry Benchmark Survey (preliminary results)

The under-performance of the London hotel market is not surprising given that North American visitors are a key source market, particularly at the luxury end of the market.  Recent figures from the British Airport Authority (BAA) reveal that passenger arrivals from North America were down 31.3 percent in October, whilst other long haul traffic declined by 16.4 percent.  At Heathrow, passenger numbers fell 20.1 percent, whilst at Gatwick the fall was 12.7 percent.  (One reason for the lower decline in passenger movements at Gatwick may be that the airport supports more low cost airlines, which appear to have been less adversely affected by the recent events.)

The fall in passenger arrivals at both Heathrow and Gatwick has directly impacted performance of these two markets and not surprisingly there appears to have a very close correlation between passenger arrival data from BAA and Andersen’s market occupancy data, as illustrated in the table which follows.

Market occupancy at Heathrow and Gatwick compared to the change in terminal passenger numbers – October 2001

Source:  Andersen Hotel Industry Benchmark Survey (preliminary results)/BAA

The London market is not alone in being impacted by the current economic climate and curtailment of travel.  Other major European gateway cities have also been affected led by double digit falls in occupancy, as companies and individuals opted not to travel.  Paris saw revPAR plunge 38.4 percent, led by a 29.3 percent decline in room occupancy and a 13 percent fall in average rate.  We anticipate that once all the data for Paris is received, however, the fall may not be as great.  Frankfurt hotels were able to push room rates up 15 percent as a result of the Book Fair.  Frankfurt’s second largest fair usually attracts over half a million visitors, and as a result demand for accommodation is at a premium enabling hotels to increase average room prices.  Although attendance at the fair was down this year, it appears as though delegates were forced to honour rates negotiated earlier in the year, before the economic downturn and events of September 11.

Commenting on the results, Julia Felton, Global Head of Andersen’s Hospitality Knowledge Services Group, said: “We believe trading conditions in many of Europe’s gateway cities will continue to be tough for the next six months, given that the demand base of many of these markets is reliant on international travellers, in particular those from the North American market and the health of the global economy.  We believe the rate of decline will begin to slow in November.  Provincial markets are typically more dependent on domestic business and their local economy and should prove to be more resilient.” 

Nick van Marken, the partner in charge of hospitality consulting highlighted that, “In my opinion, southern Europe is best positioned to weather this volatile trading environment and I expect increased interest in the Mediterranean resort sector as people stay closer to home”.

Performance of London compared to other gateway cities – October 2001

Note:  all data in euros except London that is in UK£

Source:  Andersen Hotel Industry Benchmark Survey (preliminary results)

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Company Information

Launched in 1996 as the definitive source of hotel performance data outside North America, the Andersen Hotel Industry Benchmark Survey comprises information gathered from more than 5,000 hotels in 300 markets across 140 countries.  The survey currently tracks hotel performance everywhere outside the North America.  Regional surveys are produced for Asia Pacific, the Caribbean and Latin America, Europe and the Middle East and Africa.  These are supported by in-depth country/city reports for Australia, Germany, Italy, New Zealand, South Africa, the UK and London.  Further surveys are underway for Benelux, Japan, Scandinavia and Spain.  For more information or to join the survey, contact Lorna Clarke in London at 44 20 7438 2870, e-mail us at hotelbenchmark@uk.andersen.com or visit our web site www.hotelbenchmark.com.

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