November numbers poise UK hotels for overall positive 2018

Aberdeen, Scotland is forecast to see surging RevPAR growth in the second half of 2018 for the first time since 2014.
Properties in Aberdeen, Scotland, like the Moxy Aberdeen Airport, recorded a slight 0.8-percent increase in profit per room in November. Photo credit: Marriott International

Building on October’s GOPPAR gains, hotels across the UK in November produced a second consecutive month of profit growth, positioning hotels in the region to achieve another successful year, according to the latest data tracking of full-service hotels from HotStats.

Return to Profitability

The UK’s hotels have climbed back to profitability following the 4.9-percent, year-over-year decline recorded in Q1 2018, HotStats reported. Having achieved five months of year-over-year profit growth, including consecutive increases in October (up 9 percent) and November (up 2.3 percent), hotels in the region have now recorded a 1.1-percent increase in GOPPAR year-to-date 2018. 

The growth in profit in November was led by increases across all revenue centers, including rooms (up 3.1 percent), food and beverage (up 3 percent) and conference and banqueting (up 3.2 percent), on a per-available-room basis.

As a result, TRevPAR increased 3 percent in the month to £151.27. The November performance put year-to-date TRevPAR at 2.1 percent above the same period in 2017, rising to £142.44, according to HotStats. 

Growth in revenue was supported by cost savings, which included a 0.3 percentage point drop in payroll to 27.5 percent of total revenue. 

The positive movements in revenue and cost enabled hotels to record a profit conversion of 38.1 percent of total revenue for the month. While this is slightly below the conversion recorded in November 2017, at 38.3 percent of total revenue, it is in line with the year-to-date figure, noted HotStats. 

Growth in rooms revenue in November was led by an increasingly rare increase in both room occupancy, which grew 0.6 percentage points to 79.1 percent, and a 2.4-percent increase in achieved average room rate, which increased to £120.03 for the month. 

“While other investment sectors, particularly retail, appeared to wobble ahead of the Christmas break and the unknowns of 2019, the UK hotel market is remaining resilient,” said Michael Grove, HotStats’ director of intelligence and customer solutions, EMEA, in a statement. “The stronger performance in the second half of 2018 means hotel owners and operators in the UK are all set for another year of profit growth following the 5.1-percent increase in 2017.” 

Following is a look at some specific city data as reported by HotStats.

Aberdeen, Scotland

In line with growth across the UK, properties in the challenging Aberdeen market recorded a slight 0.8-percent increase in profit per room in November. 

The GOPPAR increase came as RevPAR decreased 3.6 percent year-over-year. It fell to £42.83, following a relatively positive period of performance throughout the summer. 

The drop in RevPAR was in spite of a 2.8-percentage-point increase in room occupancy, which grew to 72.5 percent, as volume in the city maintains its recovery, according to HotStats. However, achieved average room rate declined 7.3 percent, dropping to £59.04. TRevPAR declined 0.3 percent year-over-year. 

Meanwhile, the increase in volume in November helped drive ancillary revenues, which included a 6.6-percent year-over-year increase in food and beverage, as well as a 48.7-percent increase in conference and banqueting, on a per-available-room basis. 

In addition to a 0.3-percentage-point decrease in payroll, hotels in Aberdeen recorded a 1.8-percentage-point reduction in overheads, to 28.6 percent of total revenue.

Still, year-to-date profit levels remain 1.5-percent below the same period in 2017, with profit conversion of just 24.9 percent of total revenue. 

“It has been a very tough few years of trading for hotels in Aberdeen due to the fall-out of demand, as well as increases in supply, illustrated by the poor rate performance [in November], which was ahead of only August,” said Grove. “However, the fact that hoteliers have managed to generate a profit increase from a fairly substantial RevPAR decline is highly commendable.”

Bournemouth, England

In contrast to the static performance of hotels in Aberdeen, hotels in Bournemouth, a seaside resort on the southern coast of England, recorded a 12.9-percent, year-over-year increase in profit per room in November to £13.23. 

This was the first month that hotels in the coastal town have recorded a year-over-year increase in profit per room following what HotStats termed a "punchy" summer performance when GOPPAR hit a record £63.66 in August. 

The growth in profit was led by an 11.7-percent increase in RevPAR, which was fueled by an 8.1-percent increase in achieved average room rate to £79.72. This, noted HotStats, was in spite of recent challenges to rate performance in the city. 

In addition to the growth in rooms, an increase in revenue was recorded across all non-rooms departments. As a result, TRevPAR for hotels in Bournemouth grew 10.4 percent year-over-year to £77.05. 

The growth in revenue was further supported by costs savings, which included a 1.1 percentage point drop in payroll, which remained high at 34.2 percent of total revenue. 

As a result of the movement in revenue and costs, profit conversion at hotels in Bournemouth was recorded at 17.2 percent of total revenue, which HotStats considered "a reasonable number for the off-season" in the resort town.