Trends

Economic crisis impacts hotels across the UK during Q3 and Q4 2008

Deloitte, the business advisory firm, has found that 2008 was a year of two halves for hoteliers across the UK. October marked the last month of hotel performance growth, up 1.4 percent on the prior year. However, it was only a matter of time before hoteliers began to feel the effects of both consumers and corporations reducing their travel budgets.

Deloitte In November, revenue per available room (revPAR) fell 8.2 percent as occupancy dropped 6.2 percent. By the end of year, year-to-December revPAR was in negative territory down 0.4 percent on 2007 to £59.

Brighton reported a revPAR decline of 11.8 percent in 2008. The city saw several new and refurbished hotels open in late 2007 and throughout 2008. This new supply combined with decelerating demand from the meetings, incentive, conference and exhibitions (MICE) market made for difficult times and consequently, Brighton saw the greatest decrease in revPAR performance in 2008. Reading and the M4 Corridor experienced the second largest revPAR decline down 5.7 percent on the previous year which is primarily explained by this region's greater exposure to the US through the technology companies based here.

Liverpool bucked the trend, benefiting from its status as European Capital of Culture. In 2008 revPAR increased 11.9 percent as occupancy rose and hotels in the city were able to increase average room rates by 9.2 percent.

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Leeds also saw revPAR rise 4.9 percent to £42. The city's new room supply is balancing out with strong demand from the MICE market attracted to the Royal Armouries Museum event space, in addition to playing host to events such as the World Corporate Games in July 2008. Aberdeen saw revPAR rise 3.5 percent as it continued to benefit from demand from oil and gas companies, while hoteliers in London also increased revPAR, up 2.7 percent to £93 buoyed by strong average room rate growth at the beginning of 2008.

Meanwhile, the only other cities to achieve positive revPAR growth in the UK year-to-December 2008 were York and Sheffield up 2.4 percent and 0.4 percent respectively.

Commenting, Marvin Rust, Hospitality Managing Partner at Deloitte said: 'Despite the decline in revPAR, hoteliers should take credit for what they have achieved in a tough operating climate. Results for the second half of the year were inevitably going to be weak given the current economic environment but despite falling occupancy, many hotels have managed to maintain their average room rates, which is important, as once reduced it can be difficult to increase room rates to prior levels when economic conditions improve.

'Looking ahead, 2009 will be an extremely difficult year for hoteliers across the UK with further substantial falls in revPAR to come. In a downturn London is normally hit harder than regional centres but with a weak currency providing some countercyclical balance and a fragile domestic economy, the capital is likely to be the first to bounce back when recovery begins.'

Source: STR Global



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