Despite recording a 0.6% increase in Total Revenue in November, profit per room at hotels in the UK fell by 1.1% due to escalating costs, according to the latest worldwide poll of full-service hotels from HotStats.
Growth in revenue levels was marginal this month, led by a 0.5% increase in RevPAR, to £91.46. The increase in RevPAR was in spite of a 0.6-percentage point decline in room occupancy, to 78.5%, which was offset by a 1.3% increase in achieved average room rate, to £116.56.
In addition, year-on-year growth in Non-Rooms Revenues was limited, at just 0.9% in the Food and Beverage department, with growth also recorded in Conference and Banqueting (+2.6%) and Leisure (+3.0%), on a per available room basis.
As a result of the movement in all revenue departments in November, TrevPAR at hotels in the UK increased by 0.6% to £145.68, which was 5.1% above the year-to-date performance in this measure, at £138.61.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
November 2017 v November 2016
RevPAR: +0.5% to £91.46
TrevPAR: +0.6% to £145.68
Payroll: + 1.0 pts to 27.6%
GOPPAR: -1.1% to £55.80
However, the minimal growth in TrevPAR was cancelled out by rising costs, which primarily included a 1.0 percentage point increase in Payroll, to 27.6% of total revenue.
Profit levels were also hit by a 0.7% year-on-year increase in ‘Overhead’ costs, including Property & Maintenance Expenses (+4.0%) and Utilities (+1.7%), on a per available room basis.
As a result of the movement in revenue and cost, GOPPAR at hotels in the UK dropped by 1.1% to £55.80 in November, which is equivalent to a profit conversion of 38.3% of total revenue.
“It is months like this which really highlight how revenue growth can mask the underlying pressures which are impacting profit. Rising costs will be an issue for hoteliers into 2018; a 4.4 per cent rise in the National Living Wage, increases in Pension contributions and food, beverage and energy price rises will take their toll on UK hotel profitability.
With a limit on how much hoteliers can seek to uplift revenues, they will need to focus on cost management and productivity improvement to deliver increased bottom line profit and, therefore, preserve or grow capital values”said Pablo Alonso, CEO of HotStats.
In contrast to the performance of hotels across the UK, properties in York were able to convert a minimal top line increase into considerable bottom line growth with cost savings across all departments.
Despite recording a 0.1-percentage point decline in room occupancy in November, to 79.6%, hotels in York achieved a 2.5% increase in RevPAR, thanks to a 2.7% increase in average room rate, to £94.14.
Profit & Loss Key Performance Indicators – York (in GBP)
November 2017 v November 2016
RevPAR: +2.5% to £74.90
TrevPAR: +2.3% to £119.08
Payroll: – 1.4 pts to 29.8%
GOPPAR: +14.1% to £38.97
In addition to the growth in Rooms Revenue, hotels in York recorded a mixed performance in Non-Rooms Departments, which included a 0.8% increase in Food & Beverage, but a 5.1% decline in Conference & Banqueting Revenue, on a per available room basis. Despite this, TrevPAR at hotels in York increased by 2.3%, to £119.08.
Furthermore, amongst other cost savings, a 1.4-percentage point drop in Payroll to 29.8% of total revenue, enabled properties in the medieval city to record a 14.1% increase in profit per room, to £38.97.
The 3.4-percentage point increase in profit conversion this month, to 32.7% of total revenue, represents a significant increase in the bottom line for hotel owners and operators in York.
“Hotels in York have bucked the trend and been one of few markets to record a reduction in payroll costs this month. This is not always possible in leisure-led markets, particularly in the quieter shoulder months, but York’s hoteliers should be applauded for their ability to leverage a strong profit performance from a relatively limited revenue increase due to highly efficient cost management,” added Pablo.
In stark contrast to the performance of York, another of the UK’s finest tourist destinations, Stratford-upon-Avon, did not fare so well this month, recording a 15.0% year-on-year decline in profit per room.
The strength of the visitor proposition in Stratford-upon-Avon means performance peaks during the summer months, as the market mix is dominated by demand from the leisure segment. Conversely, the absence of a solid commercial base means the volume of demand drops during the typical ‘off season’ illustrated by room occupancy levels plummeting to just 64.9% in November. This is 13.6 percentage points behind the average for the UK this month, at 78.5%.
In addition to the decline in occupancy, a 0.2% drop in average room rate contributed to the 4.8% decline in RevPAR, to £52.43. And despite Non-Rooms Revenues comprising approximately 48% of Total Revenue this month, TrevPAR at hotels in Stratford-upon-Avon fell by 2.6%, to £100.72.
Profit & Loss Key Performance Indicators – Stratford-upon-Avon (in GBP)
November 2017 v November 2016
RevPAR: -4.8% to £52.43
TrevPAR: -2.6% to £100.72
Payroll: +3.8 pts to 39.7%
GOPPAR: -15.0% to £20.83
The falling revenue levels were further exacerbated by rising costs, which were led by a 3.8 percentage point increase in Payroll, to a lofty 39.7% of total revenue.
As a result, profit per room at hotels in Stratford-upon-Avon fell to just £20.83 in November, equivalent to a profit conversion of just 20.7% of total revenue and further illustrating the challenging trading conditions for hotels in the city outside of the bustling summer months.
Occupancy (%) – Is that proportion of the bedrooms available during the period which are occupied during the period.
Average Room Rate (ARR) – Is the total bedroom revenue for the period divided by the total bedrooms occupied during the period.
Room Revpar (RevPAR) – Is the total bedroom revenue for the period divided by the total available rooms during the period.
Total Revpar (TRevPAR) – Is the combined total of all revenues divided by the total available rooms during the period.
Payroll % – Is the payroll for all hotels in the sample as a percentage of total revenue.
GOP PAR – Is the Total Gross Operating Profit for the period divided by the total available rooms during the period.
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