Hotels in the UK may never be as profitable as they were prior to the economic downturn and using Revenue per Available Room (RevPAR) to analyse the health of the hotel industry is now an outdated yardstick, according to TRI Hospitality Consulting's latest report.
The report noted that RevPAR is especially misleading in the current operating environment, when the profit per room of many hotels across the UK continues to decline. It stated: “RevPAR has been the benchmark of choice for the hotel industry for decades and in the past it was accurate to say that the profitability of a hotel would more or less track in line with RevPAR. However, the longest and deepest recession since records began has resulted in an accelerated realignment of the revenue and cost structure of hotels.”
Jonathan Langston, managing director of TRI, said: “The hotel industry is exceptional in that historically performance benchmarks have been at the top line, but now with the gap between RevPAR and Gross Operating Profit per Room (GOPPAR) growing, the future of hotel benchmarking must be to look at what lies between.”
TRI suggested that measures such as GOPPAR and Total Revenue per Room (TrevPAR) are better indicators.
However, hoteliers might not like the look of what they see if these new benchmarks are adopted. The report stated that: “In the provincial UK, whilst overall RevPAR is now approximately three per cent above 2002 levels at £48.26 in 2011, GOPPAR has dropped to £25.16 in 2011 from £37.11 in 2002.” The top three provincial cities in regard to increased GOPPAR are Cambridge, Oxford and Edinburgh.
According to TRI, since late 2009, 33 per cent of London hotels recorded a decline in profit in 2011. The report showed: “Although RevPAR in London has grown by approximately 50 per cent since 2002, contributing to a 36 per cent increase in profit per room, the gap between these two measures (RevPAr and GOPPAR) in London has grown by 84 per cent in the last 10 years.”
Pictured: Jonathan Langston, TRI Hospitality