The UK hotel sector remained resilient in October despite Autumn Budget speculation ramping up, but hoteliers had to work harder to maintain operating profits, according to the RSM Hotels Tracker.
The data, which is compiled and produced by Hotstats and analysed by RSM UK, shows occupancy of UK hotels rose from 80.9% to 82.4% in October year-on-year, and was up from 84.2% to 85.8% in London.
Average daily rates (ADR) of occupied rooms also increased in the UK from £151.81 to £155.03 in October year-on-year and was up from £217.80 to £222.64 in London.
Despite lower-than-inflation growth in room rates, the combination of higher occupancy and increased rates saw RevPAR growth keep track with inflation. RevPAR rose from £122.88 to £127.76 (a 4% increase) in the UK and from £183.48 to £191.20 (a 4.2% increase) in London.
However, due to higher costs, gross operating profits were flat for UK hotels from 38.4% to 38.5% in October year-on-year and fell slightly from 43.3% to 43.1% in London.
“Shaky consumer confidence in the lead up to the Autumn Budget, did not appear to filter through to the hotel market in October, as travel and experiences remain a top priority for consumers. In contrast, households appeared to scale back in areas such as retail and eating out as Autumn Budget jitters took hold,” said Chris Tate, Partner and Head of Hotels at RSM UK.
While hotel occupancy and room rates improved year-on-year, operating profits stood still in October, suggesting hoteliers are having to work harder but are getting less in return, he said.
This comes just as the sector adjusts to the National Insurance rise, which means hotels now have to factor in another increase in the national minimum wage next April. For many, this means finding further ways to create efficiencies to avoid hitting the bottom line, said Tate.
“The concern for the sector is that unless consumer confidence makes a recovery, it may just be a matter of time before it hits the hotel market,” he said.
“The Autumn Budget saw the Chancellor announce a further freeze on income tax thresholds, which will leave consumers feeling worse off in the future, along with local mayors being granted powers to introduce tourist levies, adding to the price of a UK stay. This could mean the sector’s current resilience is set to be severely tested.”
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