Newcastle the exception as UK hotels show decrease in 2019 profits

Increased costs have dented profit margins at UK hotels in May, despite RevPAR (revenue per available room) growth.

The UK hotel business now has a year-over-year decrease in profits in each month of 2019, according to the new data from HotStats Hotels.

In June, the YOY decline in GOPPAR (gross operating profit per available room) was at three per cent, with a slight increase of 0.3 per cent in RevPAR to £93.84.

More positive news reveals that revenue levels have stayed buoyant, with YOY increase in revenue streams such as food and beverage (a 3.5 per cent rise) and conference and banqueting figures up by 5.6 per cent. This contributed to a one per cent rise in TRevPAR (total revenue per available room) to £145.13.

Despite this upturn, revenue growth was whittled away by increased costs such as a 4.5 per cent YOY rise in payroll to £41.71, and a 2.3 per cent jump in overheads to £31.29.

More promisingly, profit conversion stayed constant at 37 per cent of total revenue.

There were some UK cities that bucked the trend, such as Newcastle hotels, which saw a 17.2 per cent YOY increase in profit per room to £30.72. A number of events in the northern city attributed to this hike including the Great Exhibition of the North, the Heineken Champions Cup and the European Rugby Challenge Cup finals.

This was the strongest GOPPAR performance in Newcastle since September and recorded a high for 2019, which saw a decline in profit since 2018, due to an increase in supply.

The region will receive a further boost from Gateshead Quays, which is expected to cost around £260m, and will be completed by 2023, with the addition of new hotels.

Peter Udall, Gateshead Council’s service director told M&IT: “The Quays is a catalyst which will raise the profile of the region and make it worthy of coming to. It is the start of an urban regeneration and somewhere people want to invest in.”

Aberdeen hotels have not fared so well, with an ongoing decline in YOY profit per room, which dropped by 7.8 per cent in June to £17.00 and contributed to the 22.9 per cent YOY decline for 2019.

The average room rate fell by five per cent in the month to £57.52 and has now dropped by almost £25 since 2016.

Profit & Loss Key Performance Indicators – Newcastle (in GBP)

KPI May 2019 v. May 2018
RevPAR +10.2% to £64.97
TRevPAR +3.8% to £93.84
Payroll -7.2% to £24.68
GOPPAR +17.2% to £30.72