Discordant Hotel Performance at UK Hotels Continues

Revenue growth hasn’t been an issue for UK hoteliers this year. It’s driving profit that has them frustrated.

In a tale that is becoming all too common for the region, Revenue per available room (RevPAR) at UK hotels was up in November, but profit against the same time last year was negative, according to data from HotStats. RevPAR grew slightly 0.3% YOY, while gross operating profit per available room (GOPPAR) was down 1.8% YOY, illustrating the sometimes incongruous relationship between revenue and profit.

Yearly numbers note the trend: RevPAR is up 1.9% YTD, while GOPPAR is down 0.9%. Moreover, while 2019 has seen eight months of YOY total revenue per available room (TRevPAR) increases, it’s also seen eight months of Year-On-Year GOPPAR declines.

Growing revenue has not been a problem for UK hotels this year (though revenue gains have narrowed toward the end of the year), but flow-through has, evidenced by the expense creep that is having a pernicious bottom-line impact. Total labour costs on a per-available-room basis were up 2.3% YOY in November, while Property & Maintenance expenses saw a 5.1% YOY jump. Year-to-date, labour costs are up 3.4% while total overhead costs are up 2.3%.

Profit margin was down 0.6 percentage points in November to 37.5%.

The divergent revenue and profit picture across the totality of the UK held true in November in Birmingham, where both RevPAR and TRevPAR were up YOY, 3.6% and 1.1%, respectively, against a resulting YOY decrease in GOPPAR of 1.5%.

Profit was dragged down by a 5.8% YOY jump in total overhead costs, though which was blunted by a 5.0% overall drop in total hotel labour costs, a number that is down 1.6% YTD. Meanwhile, undistributed expenses saw increases across the board, including Admin. & General (up 8.6% YOY), P&M (up 7.3% YOY) and Sales & Marketing (up 13.4% YOY).

London hotels checked in with similar results. RevPAR in the month was up 0.7 percent YOY on a 2.6% YOY increase in average room rate. Occupancy was down 1.5 percentage points to 82.3%. Total revenue was down 0.4% YOY, as total F&B RevPAR decreased 2.4% YOY. The drop in TRevPAR helped to explain the 2.4% decrease in GOPPAR, which was exacerbated by a 3.5% jump in labour costs on a PAR basis (up 5.3% YTD) and a 0.9% increase in total overheads. Utility expenses did come down 1.4% YOY in November.

For year-to-date, hotels in London have recorded a 2.6% increase in TRevPAR and a 1.0% increase in GOPPAR, signs of a still strong, if not more restrained in growth market. Profit margin for the month of November was recorded at 44.7%, a 1.0 percentage point drop from the same time last year.