London hotel market polarises

Hotel rooms in London with average room rates over £160 are showing double-digit growth in revenue per available room (revPAR) for year-to-April 2006 according to the HotelBenchmark? Survey by Deloitte.This top end segment of the market recorded 7% growth in average room rates and a 12% increase in occupancy, leading to a whopping 20% growth in revPAR compared to the same period in 2005.

In contrast, hotels in London with average room rates under £80 are struggling to see any growth, recording just under 1% increase in revPAR for year-to-April 2006. Rate dropped by 1% and occupancy grew by 1% to 77% compared to the same period in 2005.

Marvin Rust, Hospitality Managing Partner at Deloitte says: “This polarisation in the London market is consistent with what is happening in the UK regions, but on a much more dramatic scale. Top end hotels are more vulnerable to greater fluctuation in both occupancy and room rates, however, the more modestly priced hotels are struggling to lift room rates in a market where price is arguably the predominant factor for customers.”

London recorded 8% revPAR growth on average across all segments, owing to a 5% increase in occupancy levels to 77% and a 3% increase in average room rates to £107.

Airport hotels, which in 2005 were one of the strongest segments of the hotel market for revenue growth, have now levelled out, with Gatwick recording just a 2% increase in revPAR year-to-April 2006 and Heathrow performing only slightly better with 3% growth in revPAR.

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“Business travel remained strong, reflected in the performance at the top end of the hotel market. Airport hotels’ slowed growth is consistent with UKinbound’s assessment that it was a relatively flat first quarter for in bound traffic figures and BAA also reporting weaker demand for domestic travel over the same period,” adds Rust.

Aberdeen continues to be the top performer in the regions over the period of year-to-April 2006, with 18.5% growth in revenue per available room - sustaining their high rate of 17.5% growth over the course of 2005. This is supported by business demand in the oil industry and the related growth of passenger numbers up 15.9% on 2005.
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