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UK chain hotels market review shows strong profit growth

South West Hotels on Course for More Profit in 2016 Despite October Stumble

South West Hotels on Course for More Profit in 2016 Despite October Stumble

Profit per room at hotels in the South West region fell by 5.0% year-on-year in October, but remained on course for a third consecutive year of growth in 2016, according to the latest data from HotStats.

Further to the growth in 2014 (+9.5%) and 2015 (+11.7%), GOPPAR (Gross Operating Profit per Available Room) at hotels in the South West has increased by 2.6% year-to-date 2016, to £33.02.

The decline in profit in October was the largest monthly year-on-year drop in the region in 2016 and may be related to the demand associated with the Rugby World Cup 2015 fixtures hosted in the South West this time last year at venues in Exeter, Gloucester and volume displaced from nearby Cardiff.

As a result, year-on-year occupancy levels in the South West fell by 2.2 percentage points to 77.1% this month, with a 1.4% decline also recorded in achieved average room rate, as decreases were recorded in both the conference (-7.8%) and group tours (-6.1%) segments.

Despite the decline this month, hotels in the South West region have recorded an impressive 30.9% increase in profit per room in the 36 months to October 2016, to £32.51.

International Tourism Driving Huge Profit Growth at Edinburgh Hotels

Hotels in Edinburgh recorded an 18.4% increase in profit per room this month, which was primarily fuelled by growth in international visitors to the city.

As a result of top line increases in both room occupancy (+1.9 percentage points) and achieved average room rate (+10.1%), hotels in the Scottish capital recorded a 12.7% increase in RevPAR (Revenue per Available Room) for the month, to £92.29.

Consistently strong occupancy levels, averaging 82.6% in the 12 months to October 2016, have enabled Edinburgh hoteliers to leverage rates across the majority of segments, illustrated by the increase in the achieved rate in the corporate (+6.4%) and leisure (+14.9%) segments this month, but it was the Best Available Rate segment which achieved the biggest increase in October, at 12.2%, to £120.65.

The strong demand for hotel accommodation is a direct reflection of the continued success of Edinburgh Airport, which handled 1.1 million passengers in October, a 12.5% year-on-year increase on the same period in 2015, of which the number of international passengers increased by 23.6%.

Despite year-to-date increases in both payroll (+6.5%) and overheads (+1.4%), a 7.3% increase in total revenue has helped Edinburgh hoteliers record profit growth of 9.8%, to £53.89.

Newcastle Hotels Feel the Effect of New Supply

The addition of approximately 820 bedrooms to the Newcastle hotel market has contributed to a 7.1% year-on-year decline in RevPAR and a subsequent 8.0% drop in profit per room year-to-date 2016.

Since the beginning of 2015, additions to the market have included a 160-bedroom Hampton by Hilton, 222-bedroom Motel One, 251-bedroom Crowne Plaza and 184-bedroom Premier Inn, which have undoubtedly contributed to falling room occupancy (-3.8 percentage points) and achieved average room rate (-2.4%) performance for year-to-date 2016.

The decline in profit accelerated this month, falling by 24.0% year-on-year, as the city was one year on from the exceptional performance in October 2015 when St James’ Park hosted three group matches in the Rugby World Cup. The bottom line decline was primarily due to top line decreases as room occupancy fell by 3.3 percentage points, to 78.5%, and achieved rate plummeted by 15.0% to £69.43.

A 3.8 percentage point increase in payroll, to 29.1% of total revenue, added further woe to the falling profit performance of Newcastle hotels this month.