London hotels soar ahead in second quarter after challenging first quarter of 2011

01 July 2011 by
London hotels soar ahead in second quarter after challenging first quarter of 2011

Robust room rates growth in London in April and May resulted in a 11.4% revpar increase in the first five months of 2011 compared with the same period last year, according to the latest hotel analysis.

However, the pace of recovery in the regions is tougher and a decline in rates has dampened growth, the Pricewaterhouse Coopers (PwC) data reveals.

Liz Hall, head of hotel research at PwC, said: "Hotels have delivered somewhat volatile trading data so far this year. In January and February London demand dipped, but a strong March, a sparkling April and a spectacular May suggest London's juggernaut run isn't ready to stop just yet."

Outside London, hoteliers achieved positive revpar growth in the five months to May. But regional average room rate still fell by 1.9% in April and a further 0.5% in May.

"London's hotel market continues to perform considerably better than the UK regional market," said Hall. "But in the first two months of 2011 the capital saw unexpected occupancy declines in January and February of 2% and 3.8% respectively, taking occupancies to 69.2% and 75% respectively. By May though, occupancies were back up at almost 85% - in reality almost full-up."

The Royal Wedding in April failed to attract the bonanza some observers predicted. Nevertheless, despite the impact to corporate business from the protracted Easter shutdown, it was a good result in April, with occupancy growing by 3% to 79.9% and average room rate increasing by almost 12%, driving a 15% gain in revpar to £100. In May an increase in average room rate of 19.3% drove revpar up by 20%.

PwC highlighted several reasons for hotels not performing better during the first quarter of the year:

• The unexpected consumer and investment spending contraction
• Lower footfall in London as a result of the weaker domestic demand impacting London retail and theatres
• Severe weather in December and early January
• Tourists putting off trips and waiting until April to visit London for the Royal Wedding
• A decline in government business
• Above average levels of supply in London, depressing occupancy levels. A higher proportion of luxury and upscale hotels in London is, however, likely to have lifted London rates
• In the regions, particularly, a lacklustre meetings and conferences market is still struggling to get rates back up. Many UK operators saw modest gains made in the second half of 2010 slip away again in early 2011

Hospitality one of the worst sectors affected by the recession >>

Revpar of UK hotels increases 3.8% in first quarter >>

Regional hotels continue to face challenging times >>

By Janet Harmer

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TagsFinance and Hotels
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