UK hotels can weather financial storm

The UK hotel industry had an impressive 2007, rounding off a period of robust growth in the industry over the last few years and placing it in a strong position to the weather the current global economic storm, according to Hotel Britain 2008, PKF’s definitive guide to the performance and prospects of the UK hotel industry. The report reviews the performance of 644 hotels representing over 100,000 rooms across both London and the regions.

According to Robert Barnard, Hotel Consultancy Services Partner at PKF Accountants & business advisers, the UK’s hotel industry may see slower growth in 2008, but strong investment and new concepts will shape and drive the UK hotel market.

Budget hotels look set to benefit as consumers are forecast to tighten their belts and spend less. In 2007, the budget/tourist hotels saw the largest rooms yield growths in 2007 in both London and the regions. In London, rooms yield growth was 11.6% while the regions experienced 4.3% year-on-year growth. Industry stalwarts Travelodge and Premier Inn have both announced large expansion plans.

Robert said, “The variety and key product quality invested into the budget sector may be a key driver for a positive performance in the UK hotel market.

“Continued investment within the industry will ensure interest in UK hotels; however, the economic forecasts predict lower consumer spending due to the credit crunch and a slowdown on the housing market.


“With consumers becoming more price conscious, it will be difficult for hoteliers to increase average achieved room rate (AARR), and with good occupancy levels already being achieved, demand only has room to grow slightly. This may result in small occupancy and AARR increases to push rooms yield up.”
The UK hotel industry achieved consistently high occupancy and AARR levels in 2007 with London reaching record-breaking levels.

In the capital, occupancy reached close to 83% over the year and this strength of demand for rooms meant AARR was pushed up. Average room rate increased 8.9% to £130.17 and this meant rooms yield increased 10.3% to £107.96. These figures are the highest the capital has seen since PKF started collecting data in 1974, while occupancy was the highest since 1997.

Hotels in the regions had a good year with steady increases in AARR over the year, the main driver behind the 3.0% rise in rooms yield overall.

Scotland deserves particular mention as Aberdeen, Edinburgh and Glasgow all reported exceptional results. Overall, increases in both AARR and occupancy combined to drive a 6.9% growth in rooms yield.