Hotel revenues surge in H1, Knight Frank finds

Hotels in the UK have welcomed a post-Covid rebound in the first half of the year, according to new research from Knight Frank, with London hotels recording a 35% uplift in total RevPAR. It comes as London hotels achieved an occupancy rate of 82% in June 2023, a rise of 3.2% against the prior year, while hotels outside the capital recorded saw occupancy rise 4% to almost 81%. Following “robust” seasonal demand, many hotel operators continued to pursue a strategy of rate maximisation in lieu of full occupancy recovery, recording 8.5% and 7.6% average daily rate (ADR) growth respectively in June. Hotels in both London and the regions recorded ADR growth of 23% during H1-2023 versus the same period in 2019. London’s luxury hotels achieved an ADR growth of 38% during the period, whilst strong leisure demand saw regional Golf and Spa hotels increase their ADR by 40%. Knight Frank said the recovery of the UK hotel market was further supported by a renewed influx of overseas visitors. Heathrow Airport recorded a 5.2% month-on-month uplift in overseas visitor arrivals for example, boosted by a 13.5% rise in passengers from Asia/ Pacific and a 4.3% rise in arrivals from the US. Total overseas passenger arrivals of 6.68 million were just 1.9% below June 2019. Despite rising costs, the strong revenue growth has seen resilience in terms of departmental operating income, with London recording a H1-2023 growth of 37% versus H1-2022 and the regions seeing 17% growth over the same period. UK hotels across both London and the regions, are recording departmental operating income ahead of H1-2019, up by 7% and 12% respectively. Both London and the wider UK made a full recovery in GOPPAR versus H1-2019, with the regions ahead by 3% and London recording a 2% uplift. London achieved H1-2023 GOPPAR of £82, whilst regional UK secured a GOPPAR of £29. Karen Callahan, head of Hotel Valuation and Partner at Knight Frank, said: “London’s performance during the first half of the year has seen ADR growth continue to trend upwards and along with much improved occupancy levels, this strong occupational performance is supporting profit margins and GOPPAR growth. This is a welcome counterbalance to the softening of yields that has resulted from the increasing cost of debt, and with hotels acting as an inflation hedge, investor appetite for the sector remains strong.” Philippa Goldstein, senior analyst, Hotels and Leisure at Knight Frank, added: “Given these trading results, it is not surprising that inflation levels, whilst on a downward trajectory, continue to be elevated by services and in particular hotels and travel spend. Whilst the second half of 2023 will see ADR growth more stimulated by demand than inflationary pressures, the pace of ADR growth is likely to remain strong over the next quarter. “RevPAR growth will be further underpinned from strengthening occupancy performance. London is set to benefit from the continued uplift in overseas arrivals, whilst revenue growth for the regions will come from a well-balanced mix of demand drivers and the focus on channelling a high-yielding segmentation mix.”