August 2018: Summer Sunshine Warms Profits at UK Hotels

Profit levels at UK hotels have soared over the summer, with significant year-on-year growth recorded in both July (up 7.2 percent) and August (up 9.2 percent), as the country has basked in well-above-average temperatures.

    The growth in GOPPAR this month was driven by volume from the leisure segment, which accounted for 40.6 percent of accommodated roomnights, well above the annual average of 32.1 percent for the 12 months to August 2018.

    As well as contributing to the increase in volume, year-on-year growth was also recorded in the achieved rate in the leisure segment, including the individual leisure (up 3.4 percent) and group leisure (up 1.3 percent) sectors.

    Overall in the month, hotels in the UK recorded a 2.7-percentage-point increase in room occupancy to a lofty 84.8 percent, as well as a 4.6-percent increase in achieved average room rate to £118.84, driving an 8.0-percent increase in RevPAR for the month to £100.72.

    Year-on-year growth was also recorded in non-rooms revenues, including food beverage (up 2.1 percent) on a per-available-room basis, which contributed to the 5.9-percent increase in TRevPAR to £142.88.

    In addition to growth in revenue, payroll as a percentage of revenue fell to 27.7 percent.

    Profit Loss Key Performance Indicators – Total UK (in GBP)

    • August 2018 v August 2017
    • RevPAR: +8.0% to £100.72
    • TrevPAR: +5.9% to £142.88
    • Payroll: -0.7 pts to 27.7%
    • GOPPAR: +9.2% to £55.18

    As a result of the movement in revenue and costs, GOPPAR grew to £55.18, equivalent to a profit conversion of 38.6 percent of total revenue.

    “Whilst the Bank Holiday was a bit of a washout, the warm weather in the UK for the rest of the month played a crucial role in encouraging staycations and fuelling demand for accommodation,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA at HotStats.

    “And alongside astute management from UK hoteliers, the month of August has now been transformed from a historically challenging period of trading to a very positive month of profit performance.”

    One frustration for UK hoteliers this month will be the volume of bookings via third-party websites, illustrated by the uplift in Rooms Cost of Sales (the HotStats measure of travel agent commissions, reservations fees, GDS fees, third-party fees and internet booking fees), which increased by 8.9 percent year-on-year to £7.50 per available room.

    In contrast to the growth in profit for hotels across the UK, properties in proximity to Heathrow Airport suffered a 2.5-percent decline in GOPPAR this month despite London’s largest airport welcoming 7.5 million passengers in August.

    Whilst room occupancy at Heathrow hotels increased by 1.7-percentage points this month to 87.7 percent, the prevalence of lower-yielding leisure demand in August meant that achieved average room rate dropped by 0.4 percent year-on-year to £69.87. This was the lowest rate recorded at Heathrow hotels since August 2016 when it fell to £68.59.

    Despite the low average room rate, RevPAR at hotels at Heathrow Airport increased by 1.6 percent in August to £61.28, which contributed to the 0.7-percent increase in TRevPAR to £86.06.

    In addition to the uplift in revenue, payroll as a percentage of revenue dropped to 30.9 percent.

    However, rising unallocated expenses, which included a lift in Admin General (up 8.6 percent), Sales Marketing (up 2.0 percent) and Property Maintenance (up 11.3 percent) on a per-available-room basis, wiped out the growth in revenue and led to the drop in profit per room to £25.74.

    This is equivalent to a profit conversion of 29.9 percent of total revenue and marked a fourth month of profit decline in what has been a challenging year so far for hotels at Heathrow Airport.

    “The drop in profit at Heathrow hotels this month is somewhat surprising considering the volume of traffic through the airport, particularly as it was on the back of the busiest day ever for the airport on July 29,” said Grove. “However, the decline is illustrative of the endemic cost challenges facing hotels in the UK at the moment, which meant the news of inflation creeping up to 2.4 percent was even less welcome.”

    Profit Loss Key Performance Indicators – Heathrow Airport (in GBP)

    • August 2018 v August 2017
    • RevPAR: +1.6% to £61.28
    • TrevPAR: +0.7% to £86.06
    • Payroll: -0.5 pts to 30.9%
    • GOPPAR: -2.5% to £25.74

    Meanwhile, August represented peak in performance for hotels in Edinburgh as the city hosted the ever-popular Fringe Festival, which this year broke the previous record of at least 2.8 million tickets sold for more than 3,500 shows, according to the Edinburgh Festival Fringe Society.

    Hotels leveraged the volume of demand to the city, achieving an average room rate to £202.64 in August, almost £70 above the year-to-date figure of £133.59. This contributed to the 4.3-percent increase in RevPAR to £192.08.

    Whilst declines were recorded in non-rooms revenues, including a 0.4percent drop in food and beverage revenue, TRevPAR at hotels in Edinburgh increased by 3.2 percent year-on-year to £236.54.

    In addition to revenue growth, payroll as a percentage of revenue was a palatable 17.4 percent, allowing hotels in the Scottish capital to drive a GOPPAR increase of 4.1 percent to £134.62.

    Edinburgh hotels recorded a profit conversion of a robust 56.9 percent of total revenue.

    Profit Loss Key Performance Indicators – Edinburgh (in GBP)

    • August 2018 v August 2017
    • RevPAR: +4.3% to £192.08
    • TRevPAR: +3.2%to £236.54
    • Payroll: -0.1 pts to 17.4%
    • GOPPAR: +4.1% to £134.62

    For an inside view of a local or regional market place in the hotel sector, bespoke HotStats reports are available. Terms and conditions apply. Visit to view a sample report. If you are missing your regular feed of UK, London and Region-wide performance data this is available as an annual subscription service for only £25/month plus VAT.

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    Our unique profit and loss benchmarking service enables monthly comparison of hotels” performance against a competitive set. It is distinguished by the fact that it provides in excess of 100 performance metrics covering 70 hotel performance, revenue, cost and profit statistics providing the deepest insight available into hotel operations. ©HotStats Limited 2015. Unless otherwise attributed, all material in this press release is the copyright of HotStats Limited.

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