Revenue Increase Helps UK Hotels Cover Operating Costs

This year, robust revenue growth has countered rises in operational expenses for UK branded hotels, as data experts encouraged UK hoteliers not to be overly negative about the future.

Thomas Emanuel, the senior director, of STR, told delegates at the Annual Hotel Conference in Manchester on Monday (3 October 2022): “I’m going to be unashamedly positive. I think there’s a lot of concern out there, quite rightly, but ultimately when we look at our data, things are looking good.”

He stated that the recovery of UK hotels after COVID-19 had been quick, with an average occupancy of 75% compared well to comparable western markets. The average rates have been sufficiently high in comparison to 2019, with an average premium rate of £30, which is enormous. Even after accounting for inflation, the average ADR was ahead of 2019. Emanuel predicted that ADR will rise by 1-2% in the UK regions and 3-4% in London hotels next year.

Michael Grove, chief operating officer, HotStats, said that “for the six months to August 2022, total revenue per occupied room was up 12% compared to the same period in 2019”.

Golf resorts in the United Kingdom have profited from a considerable increase in the sport’s popularity, with golf income surging by an astounding 38%. UK hotels also reported a 15% increase in cancellation fees and an 8% increase in spa and leisure spending. Although significant, the increase in utility expenditures was kept to a manageable level, resulting in a 1.7 percentage point increase in utilities as a proportion of revenue. As a result, significant revenue growth more than offset increased costs in the six months to August.

Profit margins in the premium market were the strongest (38.1% against 38.4% in the same period in 2019). The gross operating profit (GOP) margin at other full-service hotels was 37.3%, compared to 39.8% in the previous period, and 40.1% vs 43% at select and limited-service hotels.

Joe Stather, the market leader in operational real estate at Questex, moderated the discussion and asked the panelists for their essential advice for hotels going ahead.

Grove said: “Utility costs are a big risk and a big opportunity. Some economists have predicted we’ll see a bit of a flattening of energy costs next year and if we’re able to maintain some of the rates, we could be okay. It’s also a time to get into the consumption issues in hotels, particularly the old hotel stock.”

Emmanuel said that only half of tour and group demand has so far returned compared to 2019, pointing to a potential extra source of future occupancy. He commented: “Booking patterns are good and solid. Know your cost base on a granular level, but from a top-line perspective, don’t be too pessimistic.”