Birmingham's RevPAR is up, but rooms aren't turning a profit

Hotels in the UK’s northeast region recorded a 5.3-percent decline in profit per room in November—the eighth month of profit decline in the region in 2016, according to the latest data from HotStats

In spite of continued GDP growth and a positive employment outlook in the region, profit per room at northeast hotels fell by 3.7 percent for the first 11 months of 2016, in contrast to the profit growth achieved in 2014 (+13.2 percent) and 2015 (+10.1 percent) and may be due to the addition of more than 1,400 bedrooms in to the market over the last two years. 

The decline is in contrast to the UK overall, which saw a 3-percent increase in profit per room from January to November 2016 to £36.47 on the back of a 1.8-percent increase in TRevPAR to £112.58.  

With year-on-year profit growth recorded in only April, May and July in 2016, payroll levels increasing by 1.2 percentage points to 31.8 percent of total revenue and close to 400 bedrooms of stock anticipated to enter the market in 2017, northeast hotels are in a challenging period of operation.  

Birmingham RevPAR Grows, but Rooms Don't Turn a Profit

While hoteliers in Birmingham achieved a 4-percent increase in RevPAR this month—contributing to the 7.1-percent year-to-date growth—rising costs are continuing to eat away at room profit.  

RevPAR growth in Birmingham was steady in 2016, primarily fueled by increases in achieved ADR, with the rate in the corporate (+3.9 percent) and residential conference (+8.8 percent) segments supported by a significant contribution from the leisure segment, which recorded an 8.1 percent increase year-to-date November 2016 to £80.93. 

However, the growth in top-line performance was, in part, fueled by an increase in bookings via OTAs, evidenced by the 12.9-percent year-to-date increase in rooms cost of sales, to £6.12 per available room, which was in addition to the 8.8-percent year-to-date increase in rooms payroll, to £8.86. 

Despite the 6.2-percent increase in profit per room, to £41.04, year-to-date 2016 profit conversion in rooms decreased to 68.9 percent of rooms revenue from 69.5 percent during the same period in 2015.