Market Report U.K.

Profit Drops at Heathrow Hotels Despite Record Airport Passenger Numbers

Despite Heathrow Airport recording its best ever February, with a 5.5 per cent increase in passenger numbers, profit per room at nearby hotels fell by 4.3 per cent as a result of falling RevPAR and rising costs.
Departure gates at Heathrow airport - Unsplash
Profit Drops at Heathrow Hotels Despite Record Airport Passenger Numbers

Growth in profit per room at hotels in the West Midlands has been fuelled by record top line performance as the region continues to grow occupancy beyond previous levels, even during historic low periods, according to the latest data from HotStats.

However, the ability of West Midlands hoteliers to drive occupancy beyond the previous high of 71.9 per cent in February 2015 has been at the expense of a 10.4 per cent increase in Rooms Costs of Sales (ie HotStats measure of Travel Agent’s Commissions, Reservation Fees, GDS Fees, Third Party Fees and Internet Booking Fees) to £6.03, or 10.5 per cent of Rooms revenue.

Additionally, a 5.1 per cent increase in Rooms Payroll per available room resulted in Rooms profit conversion at hotels in the West Midlands falling by 0.6 percentage points to 67.7 per cent of Rooms revenue, which was in spite of a 3.9 per cent increase in RevPAR (Revenue per Available Room) for the month.

That said, the increase in Rooms Revenue at West Midlands hotels this month was supplemented by growth in non-rooms revenue, including Food and Beverage (+2.8 per cent), Conference and Banqueting (+4.8 per cent) and Leisure (+5.3 per cent), which contributed to the 3.3 per cent increase in TrevPAR (Total Revenue per Available Room) and a 4.8 per cent year-on-year increase in gross operating profit per room.

Glasgow Hotels Bouncing Back Towards Commonwealth Profit Performance

Following two years of profit decline in 2015 (-6.2 per cent) and 2016 (-1.3 per cent), hotels in Glasgow have recorded two consecutive months of strong profit growth in 2017 and are bouncing back towards the premium performance achieved in 2014 when the city hosted the Commonwealth Games.

The hotel market in Glasgow has struggled to absorb the 880 bedrooms of supply which have entered the market since 2014. And with 73 per cent of additions operating in the budget segment, there

has been significant downward pressure on rate, illustrated by the achieved average room rate in the 12 months to February 2017, which at £81.20, remains behind the rate recorded in 2014, at £81.25.

However, the 7.7 per cent increase in RevPAR in February is further to a 6.9 per cent uplift in January 2017, which has been led by growth in both price and volume.

Despite an increase in both Payroll (+4.7 per cent) and Overheads (+3.8 per cent), a 6.2 per cent increase in profit per room was recorded at Glasgow hotels for year-to-date 2017, to £20.83

Profit Drops at Heathrow Hotels Despite Record Airport Passenger Numbers

Despite Heathrow Airport recording its best ever February, with a 5.5 per cent increase in passenger numbers, profit per room at nearby hotels fell by 4.3 per cent as a result of falling RevPAR and rising costs.

Heathrow Airport accommodated a record 5.27 million passengers in February. However, a 2.0 percentage point increase in achieved average room rate was not sufficient to offset a 1.7 percentage point decline in room occupancy, and RevPAR at hotels at Heathrow Airport fell by 0.2 per cent to £57.21.

Whilst hotels at Heathrow achieved rate growth in both the individual leisure (+3.1 per cent) and group leisure (+10.0 per cent) sectors, volume dropped in both of these key segments.
In spite of the 0.2 per cent decline in Rooms Revenue, as well as a 2.6 per cent drop in Conference and Banqueting Revenue, hotels at Heathrow were able to record a 0.3 per cent increase in total revenue this month, which was primarily thanks to the 2.1 per cent year-on- year increase in Food and Beverage Revenue.

However, this revenue increase was wiped out by a 5.5 per cent year- on-year increase in payroll. As a result, profit levels at hotels at Heathrow Airport fell by 4.3 per cent this month, to £25.57 per available room, equivalent to 30.1 per cent of total revenue. 

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Infogaphic - UK Chain Hotels Market Review - February 2017

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