This year has so far, proved to be the turning point in the fortunes of the global hotel industry…
This year has so far, proved to be the turning point in the fortunes of the global hotel industry . Key destinations around the world, notably those in Asia and Eastern Europe, have been returning solid growth in revenue per available room (revPAR). However, it is not just global gateway destinations that are benefiting from this upturn. At regional level, smaller markets have also seen significant rates of growth.
When analysing the regional UK market and the 20 cities (excluding London) that are tracked by the UK edition of the HotelBenchmark Survey for the year-to-October 2004, two factors become immediately apparent. First, two of the top five markets in terms of revPAR growth are the UK`s major international airports of Heathrow and Gatwick. The second is the remaining three cities are all in the North-East of England.
The chart below positions the growth in occupancies and average room rates of the top five markets in regional UK, whilst the size of the bubble illustrates the level of revPAR growth achieved.
Top five regional UK cities revPAR growth
Year-to-October 2004 compared to the same period in 2003
Airport markets take flight
Gatwick leads the pack with 14% revPAR growth. Suffering in the aftermath of British Airways` restructuring of its route network (the dominant airline at Gatwick), the hotel market has over recent months, benefited from increased passenger traffic (up 4.8% year-to-October). In the broader market, the area surrounding Gatwick is also supported by corporate business activity originating from organisations such as Schlumberger Electronics, the Civil Aviation Authority, Thales, Unilever and GlaxoSmithKline. As economic conditions have improved this has lead to increased corporate demand.
Continuing the airport theme, Heathrow makes an appearance in our top five. Growth within the Heathrow market has been predominantly driven by occupancy gains, as shown in the chart above. This has led to revPAR increasing by just over 10%. Despite increases in passenger numbers (up 7% in the year to October), competition within the market remains fierce. This is particularly the case in terms of conference and corporate business, despite a raft of manufacturing and electronics businesses being present, such as SAP (UK), Electronic Data Systems and IBM.
Northern exposure – winners in the regional market
Moving North, Sheffield has achieved a balanced mix of occupancy and rate growth, leading to an 11% rise in revPAR. Despite this, Sheffield still trails the regional UK average in terms of absolute revPAR (circa £63), due to its underperformance in average room rates. Part of the problem is that Sheffield lacks the volume of high-rate corporate business evident in other markets. Additionally, it does not have the level of penetration in respect of weekend leisure business enjoyed by other UK cities such as Manchester or York.
That said, Sheffield does benefit from a wide-range of leisure facilities such as the Don Valley Stadium, FM Hallam Arena and Crucible Theatre. Furthermore, the lower average room rates are also a function of the mix of hotels within the city. The chart below illustrates that over 40% of the branded hotel supply in Sheffield is in the budget segment, the highest proportion of budget hotels amongst the three northern cities in the top five.
Branded hotel supply
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
