A Rough Start To The Final Quarter Of 2019 For UK Hotels

Like the three that preceded it, the final quarter of 2019 started with a year-over-year fall in profits per available room in the UK, according to data from HotStats. The 5.3% year-on-year (YOY) drop in gross operating profit per available room (GOPPAR) in October was only surpassed by the 9.4% plunge recorded in April, and marks the seventh month in the year to record a YOY contraction in profits.

A small 0.1% YOY uptick in average room rate was not enough to offset the effects of declining occupancy, which dropped by 2.2 percentage points YOY. As a result, RevPAR fell by 2.3% compared to the same month last year—the biggest cutback for this metric in 2019.

Led by a decrease in F&B revenue per available room (down 0.7% YOY), non-rooms revenue also took a hit in October, recording a 1.0% YOY fall. With declines across all major revenue centres, total revenue per available room dropped by 1.9% YOY.

The inability of UK hoteliers to control costs intensified the negative effects of a shrinking top-line. Labour costs increased by 2.2% YOY on a per-available-room basis, while ovearheads grew by 0.2%. This contributed to widening the profit gap between 2019 and 2018, with YTD 2019 profit per available room lagging 0.8% behind YTD 2018.

Cardiff is a happy exception to the overall negative results in the UK, and the 9.0% YOY increase in GOPPAR achieved in October marks the third consecutive month of profit growth in the city.

This profitability boost was driven by a strong top-line. Fuelled by YOY growth in occupancy (up 1.5 percentage points) and average rate (up 5.0%), RevPAR achieved a 5.0% increase compared to the same month of last year. F&B revenue per available room also exhibited a positive trend, climbing by 2.0% YOY. This resulted in a 3.1% YOY growth in total revenue per available room.

Even with increasing occupancy, hoteliers in Cardiff managed to control labour costs, which recorded no change compared to October of 2018 on a per-available-room basis. Overhead costs increased slightly year-over-year, by 0.4%. Despite these favourable results, YTD 2019 GOPPAR in Cardiff is still 0.5% below the YTD 2018 results. With a 6.3% YOY decline in GOPPAR, October broke the seven-month streak of profit per available room growth in Edinburgh. Still, the positive results achieved in the previous months place the city’s YTD 2019 GOPPAR 4.2% above the same period of last year.

Revenue per available room (RevPAR) suffered a 2.2% drop compared to October 2018, pulled by a 0.2 YOY percentage point fall in occupancy and a 1.9% YOY decrease in average rate. Conversely, F&B revenue per available room grew by 8.0% on a YOY basis, driving total revenue per available room up by 0.4% YOY.

This uptick in total revenue was not strong enough to counter the growth in expenses. The 4.3% YOY soar of labour costs per available room and the 3.2% YOY increase in overheads ended up eroding profitability for hoteliers in the city.



Sign up to the CLH Newsletter!

Sign up to receive highlights of the latest industry news and more from CLH News, delivered directly to your inbox twice a week!