Olympics hailed as ‘saviour of 2012’ for London hotels as Provinces see further profit decline

By Luke Nicholls

- Last updated on GMT

Related tags: Cent, Cent increase, Olympic games, Hotel

According to the HotStats survey, the London-Provincial gap widened in 2012
According to the HotStats survey, the London-Provincial gap widened in 2012
The disparity between London and the Provinces when it comes to the profitability of hotels is continuing to increase as properties in the capital recorded a third successive year of growth but those in other regions slumped to a fifth consecutive year of decline.

According to TRI Hospitality’s annual HotStats survey of 560 full-service hotels across the UK, it was the Olympic-led 90 per cent increase in profits in August which proved to be a major factor in the year-on-year increase in RevPAR of 4.9 per cent for hotels in London.

Jonathan Langston, TRI’s managing director, said: “For London hoteliers it has been a breathless charge through 2012 and it now seems like a lifetime ago that the industry was discussing how bad the Olympic Games may be for business.

“How different our perspective is now – taking nothing away from the ability of London’s hotel managers, the Olympics are the saviour of the year and we will only take positive memories away from 2012.”

Keep calm and carry on?

Other host cities did benefit from the Olympics Factor, albeit in a much milder fashion, with the UK provincial hotel market GOPPAR performance increasing by 2.3 per cent in August. As Langston argues, the overall performance of hotels in the Provinces more accurately reflects the challenges faced by hoteliers during the recession.

“Whilst our RevPAR-focused competitors will be telling you that hoteliers in the Provinces have enjoyed yet another year of profit growth, the truth is that the overall Provincial profit picture remains negative.

“After five years of decline, the ‘keep calm and carry on’ mentality is wearing a bit thin and it’s clear that the impact on the fundamental shift in the operating structure of Provincial hotels will continue to be played out as the market anticipates further casualties in 2013.”

Winners & losers

The RevPAR growth picture in 2012 is much the same as in 2011 for hotels outside of London; achieving a 1.4 per cent increase last year. However , this was offset by an increase in payroll levels (by 0.2 per cent) and in travel agent’s commission (by 6.8 per cent on a room-per-let basis), which contributed to a fifth consecutive year of profit decline; of 1.9 per cent.

The cities which saw the biggest decline included Nottingham (-12.7 per cent), Newcastle (-10.4 per cent) and Bath (-4.7 per cent). There were, however, some Provincial winners. Hotels in Liverpool and Basingstoke did particularly well 3.7 and 6.4 per cent increase in profit per room respectively.

London’s hotel performance did remain unpredictable throughout the year, with the capital’s hoteliers recording three months of year-on-year profit decline in June (-9.3 per cent) due to the Diamond Jubilee; in July (-3.1 per cent) because of pre-Olympic jitters; and in November (-5.6 per cent) as the post-Olympic hangover began to set in.

In December, London hotels returned to profit growth (of 1.6 per cent) – but this was not as convincing as some of the increases previous months. 

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