Hotels faced a tough start to 2019

According to the latest data tracked by HotStats, the UK hotel industry has had a rough start to 2019, with rising costs biting into profits.

Total gross operating profit per room came in at £35.44 in February – a 4.4 per cent drop on the same month in 2018.

Despite a 0.5 per cent increase in revenue per available room (revpar), non-room revenues dropped 0.4 per cent to 36.2 per cent of total revenue. This included a 0.7 per cent decrease in food and beverage and a 1.3 per cent decline in conference and banqueting.

Still, hotels managed to hit a 0.2 per cent gain in overall revenue. However, this was wiped out by rising costs, including a 0.5-point increase in payroll as a percentage of total revenue to 32.8 per cent.

The biggest cost increase proved to be utilities, which rose 8.7 per cent year on year to £5.98 per available room – equivalent to 4.8 per cent of total revenue. This was followed by an 8.2 per cent hike in sales and marketing expenses.

As a result, profit contribution at UK hotels was recorded at 28.7 per cent of total revenue, which is far below the average of 38.2 per cent for the 12 months to February.

Michael Grove, director of intelligence and customer solutions, EMEA at HotStats, said: “While top-line numbers have actually been positive – albeit slightly – rising costs are having an adverse impact on flow through.”

In contrast to the UK averages as a whole, properties in Cardiff saw an 8.9 per cent year-on-year increase in profit per room, owing largely to Wales hosting England in the 2019 Six Nations Rugby tournament.

But in Edinburgh, despite the city hosting Six Nations matches, gross operating profit for hotels fell 27.7 per cent – the Scottish capital’s sixth consecutive month of profit decline.