Year-on-year profitability levels grew by more than 17 per cent in October as room occupancy in the UK capital once again exceeded 90 per cent, according to the latest HotStats survey by TRI Hospitality Consulting.
This is the second month in succession and the fourth time this year that hotels in London’s four and five-star sector have achieved a room occupancy in excess of 90% and the UK capital once again achieved the highest room occupancy of all European markets polled during October.
Total Revenue per Available Room (TrevPAR) levels also remained stalwart, at €246.15 per available room, representing an increase of approximately 13% compared to the same period in 2009, whilst increasing slightly from the performance in September. The growth in TrevPAR can primarily be allied to the growth in corporate and conference demand, which accounted for more than 50% of the market mix this month, and attracts a higher ancillary spend.
As a result of the movement in achieved revenue levels, Gross Operating Profit per Available Room (GOPPAR) in London increased by 17.3 per cent during October to €129.74 from €110.60, which is more than 28 per cent above the year-to-date average of €101.14. Thanks to another month of strong trading, year-to-date profitability levels for London are approximately 43% above the second best performing European market in the sample, Amsterdam at €70.89.
Despite the increase in revenue, profitability levels in London were hampered due to an uncharacteristic increase in payroll levels to 22.8% from 21.9% of total revenue during the same period in 2009.
“In order to achieve such high room occupancy levels a wealth of demand must be available across all market sectors. For London hoteliers, the apparent recovery in the commercial market aligned with the remnants of a successful summer of leisure visitors as well as several major annual events has allowed for such a situation to occur,” said Jonathan Langston, managing director, TRI Hospitality Consulting.
The RAI drives profitability in Amsterdam
Profitability levels in Amsterdam were second only to London in October, as rooms revenue was boosted by the city’s exhibition centre hosting a packed month of events, including the ‘world’s premier financial industry convention’, according to the latest HotStats survey.
Revenue per Available Room (RevPAR) in the city grew by close to 50% as room occupancy increased by 16.1 percentage points to 87.2% from 71.1%; and average room rate grew by 21.3% from €159.30 to €193.16. The growth in rooms revenue can be primarily attributed to the strength of demand associated with Sibos, a major financial services conference, which typically attracts approximately 8,000 international attendees, and filled hotels to capacity on each of the five days of the event.
Following an investment of more than €100 million, the Amsterdam RAI has become increasingly competitive in the international conference and events sector and is set to host a number of major ‘travelling’ conventions in forthcoming years, with obvious positive knock-on effects for the city’s hoteliers. Demand for hotel accommodation in the Dutch capital was also at a premium during the annual ‘Horti Fair’ which this year attracted a worldwide audience of more than 23,000 visitors.
In addition to the positive impact on rooms revenue, Amsterdam hoteliers were well positioned to benefit from an increase in ancillary spend, resulting in a TrevPAR increase of 39.2% to €231.45 from €166.25. A 17.6% increase in food and beverage revenue per available room, to €43.60 was complemented by a 35% increase in meeting room revenue per available room as local hoteliers accommodated a number of breakout meetings associated with Sibos.
The increase in revenue reflected positively on costs, illustrated by a 4.7 percentage point decrease in payroll as a percentage of total revenue to 25.6%.
“Trading conditions during 2009 and a large part of 2010 have been challenging for markets such as Amsterdam, which having developed such a strong reputation as a destination for conferences and conventions lost out due to the impact of the credit crunch. However, two years on and the market for meetings, events and conferences seems to be recovering; and the benefits for local hoteliers are clear” added Langston.