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RevPAR growth fails to deliver profit at UK Hotels

A new HotStats study, which polled a consistent sample of nearly 45,000 hotel bedrooms across the UK over a 15-year period, identified a decline in rooms profit conversion, despite growth in RevPAR.

Now more than ever, the rooms department is the cornerstone of UK hotel operations, comprising almost two thirds of total revenue in 2015 (61.5%), increasing from just over half in 2000 (53.6%).

For hotels in the Regions, despite a 21% RevPAR increase over the last 15 years to £59.09, rooms profit has grown by only 11% during this period and has been hit by a 78% increase in Rooms Expenses, as well as a 26% increase in Rooms Payroll.

As a result, profit conversion in the rooms department at Regional UK hotels has dropped to 69.2% in 2015, from 75.1% in 2000, with a low of 67.5% recorded as recently as 2012.

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The report highlights that despite operating costs at hotels in London and the Regions broadly growing in tandem, the pace of top line growth at hotels in the capital has been well beyond that of their Regional counterparts, which has not only offset rising costs but also means the performance gap is now wider than ever.

In London, RevPAR growth over the last 15 years was recorded at 37%, which is no mean feat considering that supply in the capital has increased by approximately 50% since 2000, equivalent to approximately 50,000 additional bedrooms.

The £28.84 increase in RevPAR has been sufficient to offset the near 900% increase in Rooms Costs of Sales in London hotels over the last 15 years. Despite this stellar performance current rooms profit conversion has fallen below that achieved in 2000.

Pablo Alonso, HotStats’ CEO said of the results “a major factor which has contributed to the decline in rooms profit has been the stark increase in rooms expenses, which reflects the systemic impact of OTAs on the hotel industry since the turn of the century.”

He added “But this is not the only cost pressure on the hotel industry; national minimum wage rises and increasing employer tax burdens have also been concerns for the hotel operator striving to deliver returns to their investors. This data has far reaching consequences for the industry.”

The HotStats publication, ‘Benchmarking Beyond RevPAR’ is available now to download for free at www.hotstats.com.

Tags: profit, RevPAR, UK Hotstats

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