Olympics help London hotels record third successive year of profit growth

28 January 2013 by
Olympics help London hotels record third successive year of profit growth

London three- and four-star hotels recorded a 4.9% increase in profit per room in 2012, thanks largely to the Olympics, according to the HotStats UK Chain Hotels Market Review by TRI Hospitality Consulting.

As a result, profit per room increased from £71.73 in 2011 to £75.27 in 2012, according to a sample of 557 hotels, with an average number of 182 bedrooms, primarily in the three- and four-star sectors.

Jonathan Langston, managing director of TRI hospitality Consulting, said: "Despite the last few years being one of the toughest trading periods in recent history, hotels in London have recorded yet another year of profit growth on the back of increases in 2010 (+13.9%) and 2011 (+4.7%)."

In December, London hotels returned to profit growth (+1.6%), alongside a 0.8% drop in revenue per available room (revpar) and a 2.2% decline in average room rate.

Meanwhile, provincial hotels slumped to a fifth consecutive year of profit decline, due to another year of rising revenue being outpaced by increasing costs.

Provincial hoteliers recorded a 1.4% increase in revpar during 2012, against the 1.5% increase last year. However, profit performance was impacted by an increase in payroll levels which were up by 0.2 percentage points in 2012 to 32.4% of total revenue.

Other rising costs included that of travel agent's commissions, increasing by 6.8% on a per room let basis, to £5.05, equivalent to 7.3% of rooms revenue.

"Whilst our revpar-focussed competitors will be telling you that hoteliers in the provinces have enjoyed yet another year of growth, the truth is that the overall provincial profit picture remains negative," said Langston.

Cities which performed well in 2012 included Liverpool, with a 3.7% increase in profit per room, despite only achieving a 0.9% increase in revpar. Hotels in Basingstoke also did well with a 6.4% increase in profit per room, which was led by the strong performance of the market during the Farnborough Air Show in July.

In contrast, cities which witnessed a decline in profit per room include Newcastle (-10.4%), Nottingham (-12.7%), Bath (-4.7%), Manchester (-1.9%) and Leeds (-3.8%).

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

Mixed results for Olympic hotel occupancies and room rates >>

By Janet Harmer

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