Hotels must keep a tight reign on revenue

23 January 2008 by
Hotels must keep a tight reign on revenue

Hotel operators will have to maximise their average room rates in 2008 to maintain growth, as occupancy levels have peaked, experts have warned.

Delegates at the Master Innholder's 15th Annual Hotel General Managers Conference were told to evaluate their approach to revenue management and employ experienced people to keep a tight reign on their revenue streams.

The revenue manager has traditional been the mainstay of the five-star market but James Chappell, managing director of the Bench, urged the wider sector to embrace the role.

He warned that UK hoteliers should learn their lessons from the US market when it came to investing in occupancy, particularly with the credit crunch making it hard to access funds for expansion of room stock.

"The one thing the USA has not seen is a systematic increase in supply," he said. "In 2006 and 2007 we saw $16b (£8.2b) of transactions take place which was hotels buying each other rather than investing in hotel stock. When the downturn does come it will be much more pronounced."

UK revenue per available room (revpar) grew by 11% in 2007, compared with 12.5% growth in 2006.

UK revpar growth though remains among the strongest in the world with European hotels seeing just 8% growth in 2007 (2006: 11%) and US hoteliers struggling on 5.7% revpar growth (2006: 7.5%).

"If we are to see similar growth rates it will have to come from average rates. Is it feasible that we will get 11-12% growth in 2008 on average room rate alone? I think that is unlikely," Chappell added.

To view photos from the Master Innholder's 15th Annual Hotel General Managers Conference hover over the thumbnails.

Deloitte warns of uncertainty in 2008 for hotels' performance >>

Revpar grows by nearly 12% at London hotels >>

Credit crunch won't affect hotel market >>

By Christopher Walton

E-mail your comments to Christopher Walton here.

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