Hotel Industry Bucks the Trend in September with Jump in Occupancy and Room Rates

Occupancy rates, daily rates and gross operating profits of UK hotels benefitted from an unexpected and unseasonal spike in demand in September. The increase was in part due to large numbers of people descending on cities like London and Edinburgh to pay their respects following Her Majesty the Queen’s death and up to her State Funeral, according to the RSM Hotels Tracker.

The data, compiled and produced by Hotstats and analysed by RSM UK shows that occupancy rates of UK hotels increased to 75.4% in September compared to 72.8% in August. Occupancy rates in London were up to 73.8% in September, from 69.4% in August.

Greater demand in September meant UK hoteliers were able to charge premium rates which helped to boost operating profits. Average daily rates (ADR) of occupied rooms increased from £143.09 in August to £155.77 in September. London benefitted from an even bigger increase from £217.66 in August to £247.21 in September – exceeding the rates in June, a typically busy month in the summer trading period.

Revenue per available room of UK hotels also increased by £13 to £117.46 in September, whilst rising £31 to £182.44 in the London market.

The increase in demand has boosted the bottom line. Gross operating profits of UK hotels were 41.1% in September, up significantly from 35.5% in August. London saw an even more significant increase to 47.1%, up from 38.9% in August.

Chris Tate, head of hotels and accommodation at RSM UK, said:
‘The hotel sector bucked the trend with an unusual jump in occupancy rates and daily rates last month as crowds came together for the passing of the Queen – a monumental and historic event for the country. With high street retail and hospitality venues largely closed, hotels continued trading and were essential to housing increased visitor numbers.

‘Many hotels experienced high levels of bookings, meaning what has typically been a slower month in previous years was far from the case. London in particular experienced an uptick in bookings. It’s clear that London attracted huge numbers of people from across the UK and overseas to see the amazing pageantry of the State Funeral in honour of the Queen, and people are also willing to pay a high price to be a part of such a major occasion.

‘Whilst it’s impossible to ignore the headwinds that the hotel industry continues to face, the appointment of a new prime minister should hopefully bring some optimism and stability in the sector. September’s bounce back is unlikely to be enough to stave off the increasing costs, so hoteliers will have their fingers crossed for an announcement of targeted support in the upcoming Budget.’

Thomas Pugh, economist at RSM UK, added:
‘While the hotel industry bucked the trend in September, the economy is now almost certainly already in a recession as surging inflation and interest rates squeeze consumers’ disposable incomes. We are expecting a record drop in households’ real incomes over the next year, which will inevitably lead to a sharp fall in consumer spending. Unfortunately, spending on non-essential items such as restaurants, retail and travel will bear much of the brunt of the tightening of household budgets over the next year.

‘Although we expect the next year to be tough, with the recession lasting until Q3 2023 and GDP falling by around 1.5% in 2023, this is far from a repeat of the Global Financial Crisis when GDP fell by around 6%. We expect the economy to return to growth in 2024.’