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London chain hotels’ profits decline

Hotels in London recorded a 2.6% decline in profit per room in 2016, which was in spite of a 0.5% increase in RevPAR, according to the latest data from HotStats.

Hotels in London recorded a 2.6% decline in profit per room in 2016, which was in spite of a 0.5% increase in RevPAR, according to the latest data from HotStats.

Whilst the addition of more 4,500 bedrooms of new supply into the capital undoubtedly diluted room occupancy performance, leading to a 0.4 percentage point decline to 80.8%, a 1.1% increase in achieved average room rate to £154.26, helped to recoup the occupancy losses and drive growth in RevPAR (Revenue per Available Room) to £124.60 for 2016.

However, in a bid to achieve RevPAR growth for year-end 2016, hotels in London failed to maintain growth in other departments, suffering declines in ancillary revenues, including Food and Beverage (-0.9%) and Conference and Banqueting (-2.7%). As a result of the decline in ancillary revenues, the growth in RevPAR was entirely cancelled out and London hotels recorded a 0.6% drop in Total Revenue in 2016.

Furthermore, a 36.8% year-on-year increase in Rooms Costs of Sales for the month of December suggests that the proportion of demand booking via high-cost Online Travel Agents into London increased significantly as hoteliers fought to record an increase in RevPAR for year end 2016.

As a result of the rising costs across the operation, hotels in London recorded a profit decline in both the Rooms (-0.4%) and Food and Beverage (-3.8%) departments in 2016, further compounding the overall profit decline at hotels in the capital this year.

Edinburgh Hotels Top the Profit Growth Table in 2016

Hotels in Edinburgh recorded a 12.0% increase in profit per room in 2016, as hotel managers in the Scottish capital were able to combine an increase in revenues with a reduction in costs.

Profit growth for Edinburgh hotels is once again at the top of the table of key cities in the UK following a mixed profit performance in 2014 (+4.4%) and 2015 (-0.4%).

The growth in revenue in the Scottish capital was led by strong room occupancy levels, which remained amongst the highest in the UK in 2016, increasing by 1.4 percentage points to 82.9% enabling hoteliers to leverage achieved average room rate by 8.4%, to a record high of £114.15.

The growth in the achieved rate in the leisure (+13.2%) as well as corporate (+4.6%) segments suggests Edinburgh remains a key economic and visitor hub. Furthermore, the ongoing success of the Edinburgh Fringe Festival fuelled an 11.6% increase in RevPAR in August to £163.25.

In addition to the growth in revenue in 2016, hotels in Edinburgh recorded a 0.4 percentage point decline in payroll to 27.4% of total revenue, helping to drive a profit conversion of 38.3% of total revenue.

Absence of Events in Cardiff in 2016 Hits Hotel Profit Hard

Profit per room at Cardiff hotels fell by 6.1% in 2016 due to the absence of a number of key events in the city, but particularly the demand created by the 2015 Rugby World Cup fixtures.

Despite a positive first half of the year for hotels in Cardiff, during which they achieved a 3.6% increase in RevPAR and a 5.1% increase in profit per room, such was the significance of the year-on-year declines in September and October, that the entire year of performance was negatively impacted.

The considerably lower demand levels prohibited Cardiff hoteliers from driving premium room rates and as a result year-on-year RevPAR fell significantly in both September (-16.6%) and October (-35.8%).
In addition, declines in ancillary departments and rising costs added further woe to a tough period of operation, resulting in year-on-year profit per room plummeting in September (-28.1%) and October (-46.0%) 2016, compared to the same period in 2015.