Hotstats Data Analysis

According to the latest figures, October was another bumper month for London’s hoteliers with financial performance showing strong increases year-on-year across the board.

London RevPAR teetered agonisingly close to £150 sitting at £149.99, an increase of 8.3% from October last year. Occupancy rates increased by 0.8 percentage points over the year, hitting a high of 88.5%.  This was certainly not unexpected given that three of the 13 host stadia for the Rugby World Cup were in London, an event which sold nearly 2.5 million tickets.

Total RevPAR increased 7% to £207.91 driven mainly by the increase in room and beverage revenue, the latter growing by 5.3% POR compared to 2014, perhaps an indication that rugby visitors were busy celebrating wins (or maybe commiserating losses!).  Conversely, food RevPOR only showed modest growth of 0.4%.

It is unsurprising then that London is experiencing unprecedented levels of hotel investment with a number of new luxury sites opening in 2016.  New owners will be hoping that these are profitable investments and the data seems to support this; total GOPPAR for October 2015 was £108.38, a surge of 10.9% from October 2014.

However, margins could be squeezed if hoteliers are looking to pay the London Living Wage, currently at £9.40 per hour. Interestingly, hotel payroll figures were down across room, F&B and leisure departments in the last 12 months. Perhaps this was driven by the employer national insurance exemption that applies for under 21s. A further NI boost will be received next April when that employer exemption will apply to apprentices under 25 too.

Hotel profits could also be impacted by global political issues.  The FTSE 350 Travel and Leisure Index has fallen just over 5% in the last month following the terrorist attacks in Paris, and then the shooting down of a Russian jet on the Syrian border. Uncertainty over security has had an adverse effect on hotels in the past, in particular following September 2001. The impact on London after July 2005 was not as pronounced but visitor numbers only increased modestly in the subsequent months. 

Given the number of visitors from mainland Europe, another concern might be the strength of Sterling, which sits at €1.4196. According to ONS figures, the vast majority of total visitor numbers in Q2 of 2015 – 7.4 million – were from residents of Europe   

Despite the potential issues, our forecasters are predicting RevPar and occupancy rates to continue to grow.