Vision Hospitality Asset Management

February 28, 2011 02:00 ET

Vision Hospitality Asset Management Survey Underlines Two Speed UK Hotel Economy

London Targets 9% Growth Against Only 6.3% Elsewhere

LONDON, UNITED KINGDOM--(Marketwire - Feb. 28, 2011) - UK hoteliers are targeting revenue growth of almost 7% for 2011, according to the latest survey by leading hospitality asset manager Vision. But, says Vision, the survey masks a wide disparity in expectations between London and the rest of the country, highlighting the "two-speed" hospitality economy within the UK.

Vision's survey of more than 150 hotels nationwide indicates that in London growth expectations for 2011 are running at 8.8% in contrast to a less demanding 6.3% in the rest of the country.

There are a number of critical factors that support the London hospitality industry's positive outlook for 2011, states Vision. This includes a strong financial services sector, relatively strong demand from international businesses for conferencing in the Capital and the relative strength of the leisure travel sector, supported by weak Sterling.

London's hotels are further boosted by pre-2012 Olympics project work creating increased demand for rooms, food and beverage and conferencing facilities while the capital will further benefit from April's Royal Wedding.

Outside of London Vision believes the hospitality sector more closely mirrors the broader UK economy where reduced corporate spending is more noticeable together with great uncertainty over the impact of higher VAT on discretionary spending.

The weaker provincial hospitality industry is further exacerbated by current and future public sector spending cuts resulting in weaker room demand and lower food and beverage spend as well as conferences and other revenue generating events.

Clive Hillier, Chairman of Vision, points out: "While RevPAR has always been a well publicised measure of the hotel industry, it is Total Revenue Per Available Room (TRevPAR), encompassing all areas of income such as food and beverage, conferencing and leisure as well as rooms, that gives a more accurate picture of how the market is performing. It is in these areas where most of the pain is being felt."

In London TRevPAR grew by 9% between 2009 and 2010 but only 1.4% in provincial hotels. Closer examination of the figures indicates that rooms-generated income rose by 12.5% over the period and 2.3% elsewhere. While food and beverage, including conferencing, advanced by 5.7% in London and remained virtually flat (0.1%) in the provinces.

Turning to 2011 Vision's survey indicates that London's hoteliers are targeting food and beverage revenue growth of 10.1% while elsewhere the sector is looking for an uplift of 9.1% from food and beverage revenue giving a total TRevPAR in the capital of 8.8% and 6.3% in the provinces. Income generated from rooms is expected to contribute increases of 8.9% for London and 5.9% in the provinces. Year-on-year TRevPAR in 2011 will further be hit by the sharp decrease in cancellation revenues.

Commented Hillier: "We are concerned that lavish, as well as some basic conferencing will remain a low corporate priority as companies face uncertain income streams and low levels non-essential spending. At the same time personal disposable income is also expected to fall for many households with eating out a likely early casualty. This should greatly concern hoteliers."

Hillier also believes that profit increases will be hard won in the coming year as inflationary pressures on food and energy costs, property rates, insurance and, for the time in several years, labour costs will all impact on the bottom line.

Targeted 6.9% revenues growth would give rise to an 8.5% increase in hotel EBITDA but will only be secured if revenue growth can be achieved while containing costs.

"For hoteliers in the provinces 2011 will undoubtedly be another very challenging year, and the early results are confirming this" warns Hillier.

Contact Information

  • Vision Hospitality Asset Management
    Clive Hillier
    020 7637 3600
    Baron Phillips Associates
    Baron Phillips
    020 7920 3161