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Room rates rise but hotel profits under pressure

Room rates at UK hotels increased in February despite the impact of the Beast from the East storm late in the month.

Figures from Hotstats found that there was a 1.3 per cent rise in average room rate in the UK to £106.70 last month, compared with February 2017. This increase came despite a 0.6 percentage point fall in room occupancy to 73 per cent in February. Revpar for the country’s hotels rose by 0.4 per cent to £77.85.

But hotels’ profits are being hit by an increase in staff costs and other overheads with profit per room dropping by 5.1 per cent in February.

Pablo Alonso, CEO of Hotstats, said: “It’s been a tough start to 2018 for hotels in the UK. After several years of consistent growth, the upward trajectory has stalled somewhat, which seems to be as a result of occupancy levels hitting a ceiling.

“Now may be the perfect time for hoteliers to consider an alternative strategy, which focuses on searching for opportunities to increase non-rooms revenues, as well as preserving profit levels by reducing costs.”

Airport hotels seem to have taken the brunt of the winter weather with properties located at Heathrow seeing a 0.4 per cent fall in average room rate to £74.78 during February as occupancy dropped by 3.2 points to 73 per cent for the month.

“Heathrow airport is prone to flight cancellations during poor weather conditions, such as snow, ice or fog, and this can sometimes lead to a spike in local hotel performance if passengers are stranded in the area,” said Alonso.

“However, the prolonged period of snowfall in February, which included a battering by the Beast from the East meant people just did not travel unless it was essential, leading to a drop in demand and consequent decline in profit levels.”

The picture was more mixed for hotels at Manchester airport with room rates rising by 2.6 per cent to £85.21 in February, although this was offset by a 4.8 point fall in occupancy, which dropped to 84.8 per cent year-on-year. This pushed down revpar for the airport’s hotels by 2.9 per cent to £72.26.
 

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