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Regional hotel rates rise for the first time this year

02 September 2010
Regional hotel rates rise for the first time this year

Cautious optimism is tempered by nervousness over the future as the hotel sector digests the latest industry figures. Beth Holmes reports.

Despite a washout end to the summer the hotel sector received a fillip as the latest preliminary figures from PKF Hotel Consultancy Services showed London hotels enjoyed an extremely busy July, with occupancy reaching 92%, while regional hotels achieved a year-on-year increase in room rate for the first time this year.

In the capital, hoteliers posted strong July figures. Room rate was up 21.1% compared with the same time last year, from £115.17 to £139.49. Along with the excellent occupancy figures, overall rooms yield increased 24.9% in the capital, from £102.76 in 2009 to £128.35 this year.


In the regions, room rate increased by 0.3% to £61.70 over the same period - the first year-on-year increase seen so far this year for room rate outside the capital. Occupancy also rose by 4.7% to 77.5%, and rooms yield was up 5% to £47.81.

The figures cover a range of hotels across the country, although mainly in the three- to five-star categories.

Govinder Singh, principal consultant for hotel consultancy services at PKF, said: "The results are absolutely good news. It's safe to say we're past the worst of it."

However, hoteliers themselves are not feeling so positive. "People are feeling better than they were a year ago, but I'm not sure there's a swell of optimism out there just yet," said Keith Pope, director of Best Western GB.

"London and the Home Counties were probably buoyed significantly last month by the enormous Farnborough Air Show, so it would have been interesting to see what the figures would have been like without that huge event."

Industry watchers are comforted by the return in rate outside the capital but still feel some trepidation over the months to come.

"It's likely to be a challenging winter, although I'm not sure we're necessarily heading back to recession," continued Pope. "The two big challenges will be the impact the autumn spending review has and also the hike in VAT in January. We're hearing from members that some of their major customers are expecting hotels to take the hit on the VAT rise."

Singh believes that, from past experience, hoteliers are more able now than ever to react to a downturn. "Hoteliers have learnt from the past - 9/11 and 7/7. They've got flexible business models that can easily adapt to changing needs," he said.


Phillip Dark, vice-president and brand leader at Park Inn, agreed. "The last two years have presented turbulent trading conditions for us all," he said. "I believe we are well prepared to ride out any further challenges with a lower, flexible cost base and more effective forecasting."

Critical for the longer-term resurgence of the sector is the behaviour of the meetings, incentives, conference and events (MICE) market.

"MICE went away because companies cut back on those things, but companies can't go on for ever not training their staff, and they have started to invest in existing staff again - even if they are still not recruiting," said Singh.

"There are encouraging signs that the important conference and events segment is returning in our large event hotels as we enter autumn trading," added Dark. "However, the lead time remains short and rates competitive."

The Government spending review due to be announced on 20 October will inevitably affect business travel in the public sector, especially in cities with a large Government presence, such as Liverpool.

"Any significant reduction in Government spending is likely to have some impact on business travel in those local markets," said John Rogers, Hilton Worldwide's UK area vice-president. "However, if the upturn in trading continues, you would expect there to be a balancing-out effect."

So, while the PKF results are a timely shot in the arm for an industry that has seen its share of worrying headlines over the past 24 months, hoteliers are keeping a balanced perspective. "The industry-wide positive growth has given us confidence," concluded Rogers. "But we have some way to go before reaching full health, particularly outside London."


UK regional hotels (797) 2010 2009Change
Average daily room rate per occupied room£61.70£61.540.3%
Average daily room occupancy77.5%74% 4.7%
Average daily rooms yield per available room £47.81 £45.545%
Approximate number of rooms per day93,30093,500 -0.2%
London hotels (146)20102009ChangeAverage daily room rate per occupied room£139.49 £115.1721.1%Average daily room occupancy92% 89.2%3.1%Average daily rooms yield per available room £128.35 £102.7624.9%Approximate number of rooms per day34,100 34,150-0.1%
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