UK hotels achieve best results in five years

Hotel rooms in the UK generated an average daily yield of £59.92 last year, the highest level since 2001, a new report shows.

The Hotel Britain 2006 report by consultancy PKF is based on five years’ worth of data on 671 hotels representing 100,000 rooms.

The average hotel room in the UK now ‘earns’ £21,870 a year – just £1,500 less than the average UK salary of £23,400. The annual growth of 2.9% in 2005 was primarily driven by higher average achieved room rate (AARR) which rose 3.7% to £81.71 rather than occupancy which fell slightly by 0.8% to 73.3%, according to PFK.

Regional hotels performed better than those in London with a growth in rooms yield of 3.3% to £48.08. London hotels were hit by the aftermath of the July bombings but still managed a solid annual increase of 2.5% in rooms yield to £83.13, although the August 2005 rooms yield fell to £66.31.

Given the drop in occupancy levels, hoteliers achieved this improvement by holding their nerve on room rates which turned out to be a better yield management strategy than heavy discounting, the report states.

Regional hotels also achieved their rooms yield growth by higher AARR, particularly those charging £70-80 a night which managed to achieve a 4% increase.

Scottish hotels outperformed their Welsh and English counterparts with a 6.2% yield growth to £50.98 (compared to £48.91 for Wales and £47.20 for England). It is likely that the terrorist attacks in London drove domestic and international visitors north while Welsh hotels continued to be buoyed up by the series of large events held at Cardiff’s Millennium Stadium during the year, according to the report.

Top of the league with double-digit rooms yield growth were Liverpool, Aberdeen and Gatwick with 16.9%, 15.7% and 11.4% respectively. A programme of events to promote Liverpool’s ‘Cultural Capital of Europe 2008’ helped to fill up hotel rooms, while the revival of oil rig activity and several large conferences helped to feather Aberdonian beds. Gatwick’s good performance resulted from ever-increasing numbers of air travellers plus a much stronger AARR for refurbished hotels.

The worst performing locations were Nottingham, Solihull & Birmingham Airport and Leeds with drops in rooms yield of 6.5%, 2.5% and 1.7% respectively.

Over the five year period (2001-2005), the best performing region was Sheffield with a compound annual growth rate of 7.8% since 2001 while the worst was Swindon with a negative CAGR of 2.4%.

PKF head of hotel consultancy service Robert Barnard said: “This year’s survey reveals the fundamental strength and resilience of the UK hotel market. The first two months of 2006 are already showing positive growth in both London and the regions and, barring any environmental disasters, sickness epidemics or large-scale terrorist activity, we expect rooms yield growth to reach around 5% in the capital and 2% in the regions.

“In the longer term, the 2012 Olympics should also boost hotel performance throughout the country.”

Report by Phil Davies