The gap between revenue and profit widens for UK hotel industry

posted on 09/10/2012 13:17:36 by Kevin Gill

Figures in a new report suggest it's more important than ever for hoteliers to keep on top of their direct costs

Sign of the times: Latest figures show that it's more important than ever for hotels to keep indirect costs in check

A new report released by HotStats, a subsidiary of internationally recognised hotel experts TRI Hospitality Consulting, has revealed a widening gap between revenue and profit in UK hotels. The report highlights that the disparity between RevPAR, the industry benchmark for revenue generation per available room, and GOPPAR, a measurement of a room's operating profit, has been steadily widening since the financial crisis in 2008.

Hoteliers in the provinces are feeling the pinch greater than those in London, which enjoyed a record-breaking year 2011 in terms of revenue and profit - while hotels elsewhere continued to perform at below pre-recession levels. This trend will surely increase when figures are posted for 2012, with the capital boosted by increased demand generated by the Diamond Jubilee and the Olympic Games. Still, the gap between RevPAR and GOPPAR is widening regardless of location - in the provinces it has grown by 128% since 2002, while the equivalent figure for London hotels is a still sizeable 84%.

The first conclusion to draw from these figures is that the drop in demand for hotel accommodation is being outpaced by the growing costs of the operation. You could also surmise that costs are growing at a higher rate than the price consumers are prepared to pay for hotel accommodation. Either way you look at it, it's clearly more important than ever for hoteliers to bring their costs under control and increase their profitability.

Good news for hoteliers: Our case study shows that you can significantly reduce your direct costs and increase your profitability

The report goes on to note that the increasing cost of utilities has had a significant impact on the current situation. In London, the cost of utilities accounts for 2.7% of revenue (an increase of 0.7% since 2002), while the equivalent figure for hotels elsewhere in the country is a much larger 4.8% (an increase of 2.1%).

At Make It Cheaper, we believe we have an important role to play in helping hoteliers drive down their costs. With the amount of energy used on room occupancy, laundry services, catering and other activities, hotels generally fall into the 'high consumption' bracket. This means it is vital that owners find the most favourable rates possible and avoid automatically rolling over onto higher rates by missing renewal windows - and this is precisely where we can help.

Furthermore, hoteliers can potentially benefit from all our other services find improved rates on chip and pin transactions, broadband, landline and business insurance. If hoteliers explore these cost-reducing measures, they will increase profitability and help to close the widening gap between RevPAR and GOPPAR.

Kevin Gill

Kevin is the Brand Communications Manager at Make It Cheaper, so he makes sure people know who we are, what we do and how we do it. He's from a family of small business owners (his dad runs a chippy, mum a dancing school, uncle a scaffolding company, auntie a fancy dress shop), so he's passionate about making it easier for customers to run their businesses. He spends lots of his time making our letters and emails easy to understand, nice to look at and a pleasure to read. You can email Kevin at kevin.gill@makeitcheaper.com

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