Since the events of September 11 the performance of the UK hotel industry has been under pressure as visitor numbers have dwindled. The impact has been most severely felt in London, where revPAR declined by an unprecedented 34.7 percent in October 2001 and the occupancy level in 2001 hit a seven-year low. Encouragingly however, the differential in revPAR performance contracted each month between November 2001 (-27.5 percent) and February 2002 (-14 percent). Unfortunately, the trend has reversed again in March with revPAR declining 16.0 percent.
Julia Felton, director of the Andersen Hotel Industry Benchmark Survey comments, ?The timing of the Easter holidays this year has caused an aberration in the pattern of the general recovery that we have been witnessing in hotel performance. In 2001 the Easter holidays fell in the second week of April whilst this year they fell in the last week of March. The Easter holidays are always a period of softer demand for hotels in London, particularly those with a high reliance on commercial business. Consequently, London hotels have experienced two weeks of relatively low demand and price sensitivity. We therefore anticipate that April results should show a marked improvement over March, and so continue the gradual improvement that we have been experiencing in the market?.
Whilst all market sectors in the capital experienced revPAR declines in March, there was a marked variation in the strategies employed by hoteliers. Hotels with average room rates over £200 refused to enter into significant price discounting and, as a result, occupancy levels fell 13.8 percent to 63.5 percent for the month. However, with average room rates only falling 4.7 percent this sector reported a revPAR decline of 17.8 percent. Hotels with an average room rate below £160 adopted different tactics and sought to protect occupancy at the expense of average rate. Hotels with an average room rate below £80 and between £80-£110 reported marginal occupancy increases over 2001 levels, whilst hotels with an average room rate of between £110 and £160 reported a 0.1 percent decline. All three market segments experienced declines in average room rates of between 12 and 18 percent. Hotels with average room rates between £160-£200 found themselves floundering in the middle with a significant fall in occupancy of 8.3 percent, compounded by a 15.1 percent decline in room rate, resulting in a 22.2 percent fall in revPAR ? the highest revPAR decline in March of the market segments monitored.
Although average room rates remain under pressure, occupancy levels across the whole market have been steadily improving and are now only marginally behind March 2001 levels. In March 2002, central London hotels reported occupancy levels of 75.8 percent just 1.6 percent behind March 2001 levels. Generally speaking, London hoteliers remain optimistic about the underlying recovery in the market. With improving demand levels, they hope to soon be in a position to curtail future price discounting.
Copies of the recently released Andersen Hotel Industry Benchmark Survey Annual Survey ? London detailing an analysis of the full 2001 results are available for purchase at a cost of £250 from Andersen. Please call us on 44 20 7304 1304 or e-mail us at [email protected]