Profitability forecast to rise in London – but regions will have to wait until 2011

London hotels are forecast to enjoy increasing profitability during 2010, according to industry consultant TRI Hospitality Consulting.

Overall, TRI predicts that this year hotels in the capital will experience a rise in revenue per available room (revpar) of 2.5% and occupancy growth of 1.5% this year. This will be fuelled  primarily through an increase in international business demand as  the leisure trade will remain at similar levels to 2009. 

Meanwhile, hotels in the provinces are expected to have another tough year as domestic consumers restrict spending.  It is predicted they will experience a slight dip in profitability during 2010, before accelerating to almost double-digit growth in 2011.

The increase in VAT, rising unemployment and the anticipated stringent government spending policy after the general election are all expected to reduce the domestic consumer’s spending power.  As a result, provincial hotels are likely to experience pressure for further rate reductions from the leisure market.

“Historically, the UK provincial hotel market has experienced a lag in recovery,” said Jonathan Langston, managing director, TRI Hospitality Consulting.

“It is likely that corporates will continue to operate on tight accommodation/travel budgets, with little or no scope for hoteliers in the provinces to enhance rate to the commercial sector.”

In 2010, achieved total revenue per available room (trevpar) and gross operating profit per available room (GOPpar) is forecast to decrease by 2% and 3.2% respectively, with an increase in trevpar and GOPpar projected for 2011 of 4% and 9.1% in 2010.

For the London market, TRI forecasts a 2.8% increase in trevpar and 3.5% increase in GOPPAR in 2010, with a increase in trevpar of 4.8% and GOPpar of 7% in 2011, year-on-year.

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By Janet Harmer

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