Latest results from the HotelBenchmark Monthly Profitability Survey for London reveal this year…
Latest results from the HotelBenchmark Monthly Profitability Survey for London reveal this year is off to a cracking start for hoteliers across the capital. Year-to-April 2005 results show Income Before Fixed Charges (IBFC) has grown 7% per-available room (PAR) adding an additional £450 PAR to the bottom line. Total revenue has also increased by 7% but despite this, the profit conversion ratio remains virtually unchanged from the same period last year at 43%.
Although revenue growth has been strong, costs have also risen, with total departmental costs growing 4% and undistributed operating expenses increasing 11%. Energy costs in particular have risen sharply up 22%. Despite the burden of rising costs, revenue growth has mitigated the effect on the bottom-line.
At the end of last year, the HotelBenchmark Survey by Deloitte expanded its coverage of monthly profitability data across London. In addition to tracking the profitability of the whole of London, the survey is now segmented by three average room rate bands – under £90, £90 – £160 and over £160. The following analysis highlights the performance of each segment during January-to-April 2005 compared to the same time frame in 2004 to enable a better understanding of the trends impacting the industry.
Under £90 sees the highest rate of profit growth
Across the different average room rate bands there has been a marked variation in performance. The highest rate of profit growth was in the under £90 segment, where IBFC has increased 18%. The under £90 band is also the only segment to have recorded an improvement in the ratio of profit to revenue, up 6% to 49.4%. In all other segments the profit conversion ratio has fallen.
As illustrated in the table below, IBFC in the £90-£160 segment has risen by just 5% despite a 7% growth in total revenues. This has resulted in the profit conversion ratio falling nearly 2% to 41%. Meanwhile, the over £160 segment has seen profits dip 2% despite a 2% rise in total revenues. This has contributed to a 3% fall in the ratio of IBFC to total revenue, which now stands at 37%. This lower profit conversion ratio is attributable to the increased number of facilities that hotels in this segment traditionally offer relative to hotels in the lower average room rate categories, which render higher operational costs.
London profitability performance per available room year-to-April 2005 v 2004
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
