Payroll management impedes profitability growth in the Provinces
Higher staff costs hit profits at provincial hotels in the UK during August, according to the latest HotStats survey from TRI Hospitality Consulting.
Revenue per available room rose year-on-year for the month by 1.5% but payroll costs as a percentage of revenue crept up by 0.5 percentage points and this helped cause Gross Operating Profit Per Available Room (GOPPAR) to drop by 1.2%.
As a result, UK Provincial hotel performance was left languishing some way behind 2008 levels, following the 13.4% profitability decline during the same period in 2009.
Throughout the month of August the performance of Provincial UK hotel markets was once again mixed, as leisure-driven locations benefited from Britons holidaying at home but tools were downed in areas of prime commercial activity.
In Bath, a popular destination for both domestic and international tourism, hoteliers achieved a 10.3% year-on-year increase in TrevPAR fuelling a 6% increase in GOPPAR (to £48.92), as the leisure segment accounted for more than 55% of staying visitors at hotels polled in the city during August.
In contrast, with only 23.8% of the market mix attributed to the leisure sector, Manchester hotels suffered a 9.9% decline in TrevPAR in August.
This decline was further compounded by a 2.7 percentage point increase in payroll as a percentage of total revenue (to 45.1%), resulting in a GOPPAR decline of 33.2%.
During August, a profit conversion of just 7.4% of total revenue at Manchester hotels resulted in a GOPPAR of only £3.30 per available room.
“The month of August typically polarises those markets which are heavily reliant on the commercial sector, including Manchester and Newcastle, and those which benefit from a greater proportion of leisure demand such as Bath and Brighton.
Given the challenges of modifying cost levels for a single month, the variance in demand levels during the leisure-led summer months can have a marked impact on a hotel’s profitability,” said Jonathan Langston, managing director, TRI Hospitality Consulting.
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