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London hotels suffer second-worst profit decline of 2012 during November

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London hotels suffer second-worst profit decline of 2012 during November
Written by:

London hotels suffered their second-worst profit decline of 2012 during November as the wave of Olympic euphoria which the capital had been riding since the summer came crashing down, according to the latest HotStats survey of around 560 full-service hotels across the UK by TRI Hospitality Consulting.

While November 2011 was a tough month, with profit per room dropping by 2.4% for hotels in London, the same month this year was far worse. Aside from the 9.3% decline in gross operating profit per available room (goppar) in June, at 5.6%, November was the worst year-on-year drop in profit in 2012.

Rate declines were also suffered, with a 2.7% fall in average room rate to £136.41, from £140.19 during the same period in 2011.

“Although volume remained strong in the city and hotels in London are undoubtedly on course to achieve a third consecutive year of profit growth, it is unlikely that hoteliers will be popping Champagne corks as they look to more challenging times ahead,” explained Langston.

Meanwhile, a strong month for provincial hotels in October was reversed in November, with a 4.8% decline in profit per room. Although out-of-London hotels achieved increases in both room occupancy (+0.5 percentage points) and average achieved room rate (+0.5%), enabling a 1.2% increase in revenue per available room (revpar) to £49.71, the total revenue was negatively impacted by a decline in other ancillary revenues, such as meeting room hire revenue per available room, and rising costs.

“Unfortunately, the profit decline recorded by provincial hotels in November was one of the worst this year and completely undoes the positive performance in October,” Langston said. “And while costs continue to rise beyond increases in revenue, it is unlikely that hoteliers will get much of a break from the perpetual bad news.”

Despite the overall decline in profit per available room in the provinces, the strongest markets outside London included Oxford, Leeds and Plymouth. In Oxford a 0.1 percentage point drop in room occupancy was offset by a 6% increase in average achieved room rate, which contributed to a 3.3% increase in profit per room, to £45.33.

Mixed results for Olympic hotel occupancies and room rates >>

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By Janet Harmer

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