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London hotels see profits fall in February despite increase in revenue

28 March 2013 by
London hotels see profits fall in February despite increase in revenue

Hotels in London experienced profit decline in February for the second month in a row, despite an increase in revenue performance, according to the latest HotStats survey for the UK Chain Hotels Market Review.

A total of 624 hotels in the three- and four-star sectors were surveyed by Tri Hospitality Consulting.

Occupancy rose by 1.4 percentage points to 75.9%, while average room rate fell by 1.8%, resulting in revenue per available room (revpar) remaining flat.

The marginal increase in revenue performance was not enough to temper a greater rise in operating costs as gross operating profit per available room (goppar) declined by 2.7%.

David Bailey, deputy managing director at TRI Hospitality Consulting, said that, after a disappointing January, February's results were a lot more encouraging.

"Post-Olympic Games it will be difficult to define what a successful 2013 is, given that we have witnessed an unprecedented increase in bedroom supply in the capital over the past two years, and the market will not have the benefit of a one-off event being held in London," he explained.

"All eyes will be on the key trading period between May and November, when the volume and value of corporate and leisure demand increases significantly, to understand how trading performance will fare this year.

Meanwhile, the survey showed positive results for the provinces as revenue and gross operating profit increased during February: there was a positive gross operating profit performance of 0.1% over a rolling 12-month period for the first time since the recession began. Revpar grew by 1.8% and goppar by 1.2%. The rise in revpar stemmed from a 1.4 percentage-point increase in occupancy.

Scotland's three main cities experienced mixed fortunes during February, with Aberdeen fast becoming the best-performing hotel market in the UK outside London. Full-service hotels in Scotland's third city achieved an increase in revpar of 15.1% and goppar of 15.3%. In the 12 months to February 2013, goppar increased by over 16%.

In contrast, Edinburgh experienced a goppar drop of 20.3%, which was the result of a decline in revpar (-2.5%) and an increase in operating costs (+9.1%). Glasgow experienced an increase in goppar of 16.6%.

"While trading performance is likely to be turbulent, given recent news including the Government's revised downward forecast for GDP growth this year and continued inflationary cost pressures, the latest market data highlighting an increase in gross operating profit performance over the 12-month period to February 2013 is positive," Bailey said. "However, as the contrasting February performance of Scotland's main city hotel markets show, it is imperative to understand hotel operating performance at a local level."

Poor start to 2013 for London hotels >>

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