UK hotels warm to current British sunshine after weather washout hits March performance

Hotels across the UK have warmed to the hot weather the recent Bank Holiday weekend has brought to the UK after bad weather severely impacted its Mar-2018 performance. The wettest March in a decade, as well as unseasonal snow storms, added to the already challenging trading conditions for hotels in the UK, according to the latest poll of full-service hotels from HotStats. This all resulted in year-on-year profit per room dropping by -5.6% during the month to GBP46.13.


Summary:

  • Hotel performance metrics from HotStats for Mar-2018 show that year-on-year profit per room for full-service UK hotels dropped by -5.6% during the month to GBP46.13;
  • The poor UK profitability performance was a direct consequence of poor weather conditions in the country throughout the month that exacerbated already challenging trading conditions;
  • The drop in profit at hotels in the UK was led by a -1.4% decrease in total room revenues (TrevPAR) to GBP129.69 with declines recorded across all revenue departments;
  • Across Europe, hotels recorded a +0.7% year-on-year increase in profit per room in Mar-2018, which was in spite of heavy declines in Non-Rooms Revenue, according to HotStats.

The drop in profit at hotels in the UK was led by a -1.4% decrease in total room revenues (TrevPAR) to GBP129.69, as declines were recorded across all revenue departments, including Rooms (-1.2%), Food and Beverage (-2.4%) and Conference and Banqueting (-5.5%) on a per available room basis.

In the Rooms department, a -0.6 percentage point decline in room occupancy, to 75.2%, was further exacerbated by a -0.3% drop in achieved average room rate, to GBP109.91, which contributed to the 1.1% decline in revenue per available room (RevPAR), to GBP82.61.

As a result of the poor weather, it was demand from the leisure segment which was hardest hit, according to the HotStats data, resulting in a -3.9% year-on-year decrease in rate in the Individual Leisure segment during the month, as well as a 0.3% decline in rate in the Group Leisure segment.

The revenue decrease was further exacerbated by rising costs, which included a +1.1 percentage point increase in Payroll to 29.2% of total revenue, as well as a +0.9% increase in Overheads, which grew to 23.4% of total revenue. Once again, the uplift in Overheads was largely due to an increase in Utility costs, which soared by +11.5% year-on-year in Mar-2018, to almost 4% of total revenue, as the UK was blanketed in snow. At GBP5.15, on a per available room basis, Utility costs for the single month were more than +8% above the average in the rolling 12 months to Mar-2018.

Hotel properties in London were hit particularly hard by the bad weather with profit per room plummeting by -8.8% for the month, to GBP72.22. Whilst hotels in the capital just about managed to maintain room occupancy levels at around 80%, achieved average room rate fell by -2.9% year-on-year to GBP152.58; and as a result, RevPAR at hotels in London dropped by -3.3% to GBP120.83. Further declines in Non-Rooms Revenues contributed to a -3.2% decline in TrevPAR to GBP172.60.

The decline this month means that hotels in London have suffered a -6.2% drop in gross operating profit per available room (GOPPAR) in Q1 2018, to GBP60.50, which, according to HotStats, could continue the mixed period of trading following the profit drop in 2016 (-2.0%) and growth in 2017 (+5.4%).

Across Europe, hotels recorded a +0.7% year-on-year increase in profit per room in Mar-2018, which was in spite of heavy declines in Non-Rooms Revenue, according to HotStats. Amongst the falling Non-Rooms Revenues, hotels in Europe suffered year-on-year declines in Food & Beverage (-2.0%) and Conference & Banqueting (-7.1%) revenue, on a per available room basis.

In contrast, a robust 2.7% increase in Rooms Revenues went someway to offsetting the decline in ancillary revenues. The RevPAR growth for the month was fuelled by a +3.2% year-on-year increase in achieved average room rate, to EUR150.12, and was in spite of faltering room occupancy levels which fell by -0.3 percentage points, to 68.5%.

The HotStats data shows growth in achieved average room rate this month was supported by increases across all sector rates, including Residential Conference (+3.8%), Corporate (+4.8%) and the Group Leisure (+11.8%) segment. However, there was a notable decline in volume from the Commercial sectors, which cumulatively fell by -3.2 percentage points, to 39.4% of accommodated roomnights.

As a result of the movement in all revenue departments, TrevPAR at hotels in Europe maintained its upward trajectory, but at a much slower rate than the previous two months, at just +1.1% year-on-year, to EUR159.40. This meant that TrevPAR growth for hotels in Europe was recorded at +3.1% for Q1 2018.

Whilst hotels in Europe recorded an eleventh consecutive month of profit growth, the year-on-year increase for Mar-2018 was more measured, at just +0.7%, to EUR50.04. Despite a much lower year-on-year increase in profit this month, at EUR37.37 per available room, GOPPAR levels for Q1 2018 were up +6.8% above the same period in 2017.