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UK Chain Hotels Market Review – November 2016

Hotels in the UK North East recorded a 5.3% decline in profit per room this month, which was the eighth month of profit decline in the region in 2016, according to the latest data.

Hotels in the UK North East recorded a 5.3% decline in profit per room this month, which was the eighth month of profit decline in the region in 2016, according to the latest data.

In spite of continued GDP growth and a positive employment outlook in the region, profit per room at North East hotels has fallen by 3.7% for year-to-date 2016, which is in contrast to the profit growth achieved in 2014 (+13.2%) and 2015 (+10.1%) and may be due to the addition of more than 1,400 bedrooms in to the market over the last two years.

The decline is in contrast to the UK overall, which has recorded a 3.0% increase in profit per room in the 11 months to November 2016 to £36.47, which was on the back of a 1.8% increase in TRevPAR (Total Revenue per Available Room), to £112.58.

With year-on-year profit growth recorded in only April, May and July in 2016, payroll levels increasing by 1.2 percentage points to 31.8% of total revenue and close to 400 bedrooms of stock anticipated to enter the market in 2017, North East hotels find themselves in a challenging period of operation.

Rooms Profit Conversion Faltering at Birmingham Hotels Despite RevPAR Growth

Whilst hoteliers in Birmingham achieved a 4.0% increase in RevPAR (Revenue per Available Room) this month, which contributed to the 7.1% year-to-date growth, rising costs are continuing to eat away at profit in the Rooms department.

RevPAR growth in Birmingham has been steady in 2016 and primarily fuelled by increases in achieved average room rate, with the rate in the corporate (+3.9%) and residential conference (+8.8%) segments supported by a significant contribution from the leisure segment, which recorded an 8.1% increase year-to-date November 2016 to £80.93.

However, the growth in top line performance was, in part, fuelled by an increase in bookings via Online Travel Agents, evidenced by the 12.9% year-to-date increase in Rooms Cost of Sales, to £6.12 per available room, which was in addition to the 8.8% year-to-date increase in Rooms Payroll, to £8.86.

Despite the 6.2% increase in Rooms Profit per Room, to £41.04, year-to-date 2016 profit conversion in the Rooms Department has decreased to 68.9% of Rooms Revenue from 69.5% during the same period in 2015.

Busy Calendar of Events Boosts Profit for Nottingham Hotels in November

Profit per room at hotels in Nottingham increased by 16.9% this month, driven by an 8.6% increase in achieved average room rate as the city hosted a range of events boosting demand for accommodation in both the corporate and leisure segments.

Whilst the Nottingham hotel market has performed strongly throughout 2016, top line performance peaked in the period from September to November, with RevPAR in the city recorded at £52.92, which was 14.6% above the performance for the 12 months to November 2016 at £46.19.

The growth in achieved average room rate was primarily through the leisure segment rate, which increased by 16.2% year-on-year this month, to £71.22, which is 17.4% above the year-to-date 2016 average of £60.68, with music events at the Motorpoint Arena contributing to demand.

In addition, an uplift in the achieved rate in the commercial sector was due, in part, to major events which included the annual meeting of the British Congenital Cardiac Association, which contributed to an increase in the achieved rate in both the corporate (+4.9%) and residential conference (+0.7%) segments.

Savings in Overheads (-1.0%) on a per available room basis this month contributed to the growth in profit per room to £32.50, equivalent to a 34.0% profit conversion.