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Obama proves main draw for London’s hotel sector

23/06/2011

The state visit of US president Barack Obama provided a welcome boost for London hotels after the royal wedding proved something of a damp squib, according to the latest HotStats survey.

Year-on-year profitability levels at the capital’s hotels increased by almost 17 per cent in May, after a disappointing wedding bank holiday weekend failed to deliver an anticipated trading boost. A healthy mixture of events in May, including the RHS Chelsea Flower Show, the Champions League Final at Wembley and the visit of President Obama, helped lifted profits, according to the survey.


The main chain hotels were able to increase their prices, resulting in a year-on-year increase in average room rate of more than 14 per cent to £112 from £99 in 2010.


Jonathan Langston, MD of TRI Hospitality Consulting, the company behind the survey, said:  “The performance of the London hotel market is becoming more and more difficult to predict. Following the 10.7 per cent year-on-year growth in profit per room in the capital in May 2010, it was difficult to conceive that the market would once again record such an exceptional level of growth."


A lower level of growth in Total Revenue per Available Room (TrevPAR) in May (11.2 per cent), was put down to a more measured increase in secondary sources of revenue, such as food and beverage per available room (+5.2 per cent) and meeting room revenue per available room (8.1 per cent).


Year-on-year Gross Operating Profit per Available Room (GOPPAR) at London hotels increased by 16.9 per cent to £77 during May, equivalent to a profit conversion of almost 50 per cent of total revenue, which stood at £155. The growth in profitability levels was helped by further reductions in payroll levels as a proportion of total revenue, to 22.9 per cent from 24.2 per cent.


Elsewhere in the UK the picture was less rosy.


Signs of recovery in average room rate were evident in May as the achieved rate in the corporate sector increased by 0.5 per cent to £69. But a 3.4 per cent decline in the achieved conference rate at provincial hotels, to £80 from £83, resulted in the overall average room rate for the month remaining relatively static at £69, a decline of 0.2 per cent.


Whilst total revenue levels were hit by declines in food and beverage revenue per available room (-1.7 per cent) and meeting room revenue per available room (-4.3 per cent), total revenue per available room remained comparatively positive with a decline of only 0.4 per cent to £94 from £95 in 2010.  However significant increases in operating expenses per available room contributed to a 3.1 per cent decline in GOPPAR to £31, equivalent to roughly 33 per cent of total revenue.


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