In August of this year, The London Development Agency (LDA) announced plans to invest …
In August of this year, The London Development Agency (LDA) announced plans to invest £3.5m to create world-class hospitality service staff in London. With attention focused on the employment aspects of the industry, we review some of the major changes that have occurred within the capital.
Drawing on the results of the annual HotelBenchmark Profitability Survey by Deloitte, we have analysed the profitability performance of over 60 hotels in London over a four year period, to establish how spending on payroll has changed since the industry peak of 2000.
Payroll costs fall
As would be expected hoteliers have sought to control payroll costs over the last four years as demand levels have declined. As a result absolute payroll has fallen by nearly £650 per available room from £12,551 in 2000 to £11,904 in 2003. With occupancy levels falling nearly ten percent between 2000 and 2001 total payroll expenses contracted by 2.4 percent. Another 2.4 percent contraction in payroll was reported in 2002 with a further 0.5 percent reduction in 2003. This is encouraging given the fact that during this time both the minimum wage and national insurance contributions have increased. Clearly hoteliers are being proactive at managing this significant cost element of the business.
Whilst in absolute terms there has been a reduction in the level of spending on payroll over the last four years, payroll as a percentage of revenue has increased from 24.5 percent in 2000 to 27.8 percent in 2003. This is predominantly due to the fact that payroll is not entirely a variable cost and therefore despite declining revenues payroll cannot be cut in the same ratio. The chart below outlines the percentage of payroll to revenue by department.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
