Trading in the London and regional UK hotel markets proved to be resilient during 2003 given the extraneous factors affecting the wider international hotel industry.
For the London market in particular, hotel performance started to show signs of improvement in the final quarter of 2003. After three consecutive months of positive revenue per available room (revPAR) growth it appears as though a recovery is at last underway in the capital.
The London market, the single most important market in the UK for the majority of national and international operators, reported a revPAR decline of 3.8% in 2003. This was driven by a 1.7% decline in occupancy and a 2.2% decline in average room rate. For the year, occupancy reached 74% whilst average room rates fell just shy of the £100 barrier at £99. The greatest declines in performance were seen at the ‘economy end of the sector (hotels trading in the under £80 and with over 400 rooms category), where revPAR fell by 7% and in the Townhouse/Boutique sector where revPAR was down 6.7%.
Overall, the regional UK market reported a marginal increase in revPAR of 0.4%, which was driven by a 0.8% increase in occupancy (to 70%) and a 0.4% decline in average room rate (to £60). Cheshire, Greater Manchester and Lancashire all experienced marginal revPAR growth slightly in excess of the regional UK average, whilst Berkshire, Essex and Hertfordshire tipped the scales in the other direction.
The International Passenger Survey reported that year-to-November visitor numbers to the UK were up by 2% with expenditure up by 1%, which is welcome news given the macro travel and tourism environment. As the US Dollar has continued to depreciate against both the Sterling and the Euro, it has been the European market that has offset US visitor declines, rising by 6% between January and November 2003 against the same period in 2002.
With transatlantic passenger numbers down, it perhaps comes as no surprise that both the Gatwick and Heathrow hotel markets experienced revPAR declines of 6.9% and 1.6% respectively. However, it was average room rates and not volumes specifically which came under the greatest pressure, driving down revPAR in each of these markets.
The real success story of 2003 however has been Belfast. Improvements in political stability, commercial activity and travel, tourism and leisure infrastructure (including hotel supply) have all helped contribute to a phenomenal 14.7% increase in revPAR. This level of growth now brings the performance of the city roughly in line with the regional UK average.
Commenting on the results, Julia Felton, Executive Director of HotelBenchmark at Deloitte said: “With the Iraq war over, SARS contained and the first interest rate rises by the Bank of England failing to beat UK consumers into submission, trading conditions in the UK should continue to improve, with London well positioned to lead a European recovery.”