HotStats European Chain Hotels Market Review – June 2010

London hits 90 with Paris close behind but payroll dents French profitability

Hotels in London have recorded a rarely achieved room occupancy of 90% during June driving a year-on-year profitability increase of 16% for that month, according to the latest HotStats survey from TRI Hospitality Consulting.

The extremely high room occupancy levels in addition to a 12.8% increase in achieved average room rate to €188.16 resulted in a year-on-year growth in Revenue per Available Room (RevPAR) of 16% to €169.28.

June is traditionally a strong month for hotels in London which is led by an uplift in price and volume thanks to Wimbledon and complemented by commercial and leisure demand. Leisure demand remains strong supported by a 14.4% increase in retail sales by visitors from Western Europe, China and the Middle East (Source: British Retail Consortium).

In contrast, despite a six percentage point increase in room occupancy in Paris which resulted in an achieved room occupancy of 88.8%, average room rate declined by 7.2% to €201.86, which left the French capital 0.4% behind the same period in 2009.

Volume in the city was helped at the beginning of the month by demand from the French Open; however, commercial rates in the city remain a challenge, primarily in the corporate (-4.1%) and conference (-47.8%) sectors. Despite this, Paris finished the month at a higher RevPAR than London.

The RevPAR in Paris was approximately six per cent above London but a difference in payroll of 13.1 percentage points between the two cities left the French capital roughly 19% below the British capital in profitability terms at €105.21 and €125.27 respectively. Following a 1.8% decline, London has the leanest payroll levels of all hotel markets in our sample at 20.7% of total revenue against 33.8% in Paris, up by 2.5 percentage points.

“Although room occupancy and room rate provide a good indication of how a market is performing, rooms revenue movement paints only part of the picture. HotStats is unique in that it allows us to determine which city was truly the best achiever at the profit line and in this month it was London” said Jonathan Langston, managing director, TRI Hospitality Consulting.

Berlin bucking the trend
Year-on-year profitability levels at Berlin hotels increased by more than 40% in June due in part to an increase in average room rates across all market sectors, according to the latest HotStats survey.

Whereas hotel markets across Europe are struggling to maintain rates in the commercial sector, this month hotels in Berlin have managed to increase rate in the corporate (12.1%) and conference (6.6%) segments. In addition, rates in the leisure (15.1%), group tour (22.2%) and non-discounted rack (31.7%) sectors contributed to an overall average rate increase of 13.6% in June to €130.91.

As with Paris and London, the strong headline performance levels in Berlin in June are due to a number of events taking place in the city, including the Berlin Gay and Lesbian Festival, Gay Pride and the Capital of Cultures, which attracts more than 1.5 million visitors to the city each year. These events also boosted room occupancy by 5.2 percentage points to 79.6%.

As a result of the increases in occupancy and room rate as well as a 1.9 percentage point decrease in payroll as a percentage of total revenue to 24.8%, GOPPAR in Berlin grew by 42.7% to €72.92 in June.

“Berlin is one of very few major European cities which have successfully increased average room rate in the commercial sector reflecting the hasty recovery of the German economy. This has meant the German capital has managed to recoup all of its losses from the same period in 2009 and is now in a position from which it may grow” added Langston.