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PRODUCT NEWS
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| Luxury hotel market immune to cost of living cutbacks, reports RSM |
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| 20 Feb 2024 . BY Megan Whitby |
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| Consumer demand remains strong for luxury hotels and their premium amenities – including spas and gyms – despite the cost of living crisis / Shutterstock/NDAB Creativity |
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Despite more openings in the luxury market and therefore greater competition, it’s clear the demand is there and growing
– Chris Tate |
While the UK hotel sector ended 2023 on a high, new data shows this was largely driven by the luxury market with a spike in room rates and profits – according to the RSM Hotels Tracker: Focus on Asset Classes.
The data, compiled and produced by HotStats and analysed by RSM UK, highlights that although consumers are continuing to feel the pinch and cutting back on luxury goods, they’re still willing to spend on high-end hotels and their amenities, including spas and gyms, showing experiences continue to come out on top.
State of play
Average room rates of UK luxury hotels jumped 13.9 per cent from £320.74 in November to £365.43 in December. The increase in the middle market and budget hotels was less stark, from £132.96 to £139.30 (+4.8 per cent) and from £95.90 to £97.08 (+1.2 per cent) respectively.
The increase in room rates also filtered through to the bottom line of UK luxury hotels, with gross operating profits per available room (GOP PAR) rising 19.2 per cent from £128.12 (November) to £152.74 (December).
This was even greater in the London luxury market, with GOP PAR up from £173.00 to £208.34 in the same period (19.2 per cent). Cost pressures hit UK middle market and budget hotels, with GOP PAR down from £53.14 to £48.68 (-8.4 per cent) and from £34.21 to £29.78 respectively (-13 per cent).
Although UK occupancy was down slightly month-on-month, following seasonal trends, it was up across the board when compared to December 2022 – from 62 per cent (December 2022) to 69 per cent (December 2023) for luxury hotels; from 67 per cent to 70 per cent for the middle market; and from 69 per cent to 72 per cent for budget hotels.
Occupancy of luxury and budget hotels also exceeded pre-pandemic levels for the first time, at 68 per cent and 70 per cent respectively (December 2019).
Chris Tate, head of hotels and accommodation at RSM UK, said: “Overall it was a strong end to 2023 for the hotel industry, but it was quite a different story depending on the type of hotel.
“The luxury market emerged as the clear front runner, as strong demand over the Christmas period meant it could make hay while the sun shined. Despite more openings in the luxury market and therefore greater competition, it’s clear the demand is there and growing.
“Household budgets continue to be squeezed and consumers seem to be prioritising luxury experiences over splashing out on luxury goods. Some savvier luxury retailers, such as Armani and Audemars Piguet, have spotted this window of opportunity and are diversifying their offerings by venturing into the hotel and hospitality space.
“Despite pockets of positivity, UK tourism is still not back to pre-pandemic levels, which is further compounded by the removal of tax-free shopping. But with the regime currently under review, hotels and various other UK businesses could be set for a significant boost.”
London calling
In line with RSM's findings about demand for luxury hotels in the UK, the competition in the premium hotel market in London is heating up and there's a healthy development pipeline of high-calibre properties set to launch in the coming years.
Recent openings in the capital include Raffles and The Peninsula London while Six Senses, Rosewood, The Maybourne Hotel Group
and Mandarin Oriental are all set to open new properties over the next two years.
More about RSM
RSM is an audit, tax and consulting firm for the middle market with 4,715 partners and staff operating from 30 locations throughout the UK.
For the year ending 31 March 2023, RSM generated revenues of more than £486 million. RSM UK is a member firm of RSM International – the sixth-largest network of assurance, tax and consulting firms globally. The network spans more than 120 countries, over 800 offices and more than 64,000 people, with global revenues of US$9.4 billion.
More about HotStats
HotStats provides monthly P&L benchmarking for the hotel industry, collecting detailed financial data from over 6,000 hotels in total worldwide from over 100 brands and independent hotels, and provides over 550 different KPIs covering all operating revenues, payroll, expenses, cost of sales and ultimately departmental and total hotel profitability.
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