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Winter Causes “Profit Washout” At UK Hotels

Year-on-year profit per room dropped by 5.6% this month as 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 worldwide poll of full-service hotels from HotStats.

The drop in profit at hotels in the UK was led by a 1.4% decrease in TrevPAR, to £129.69, 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 £109.91, which contributed to the 1.1% decline in RevPAR, to £82.61.

As a result of the poor weather, it was demand from the leisure segment which was hardest hit, resulting in a 3.9% year-on-year decrease in rate in the Individual Leisure segment this 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 March, to almost 4% of total revenue, as the UK was blanketed in snow. At £5.15, on a per available room basis, Utility costs this month were more than 8% above the average in the rolling 12 months to March 2018.

Profit & Loss Key Performance Indicators – Total UK (in GBP)

March 2018 v March 2017

RevPAR: -1.2% to £82.61

TrevPAR: -1.4% to £129.66

Payroll: + 1.1 pts to 29.2%

GOPPAR: -5.6% to £46.13

As a result of the movement in revenue and costs, GOPPAR at hotels in the UK fell by 5.6% year-on-year to £46.13 in March. This was equivalent to a profit conversion of 35.6% of total revenue.

“Spring failed to materialise in March and instead it was replaced with heavy snow fall and bone-chilling temperatures as the UK experienced its worst winter since 1991.

This had the double-whammy effect of causing a drop in top line performance as hazardous conditions meant the advice was not to travel, but also the bottom line was hit by high payroll costs, as it was way too late to adjust staffing levels, and the cold weather meant the heating had to stay on,” said Pablo Alonso, CEO of HotStats.

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