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Cardiff tops UK for Hotel Profit Growth – London fares poorly compared with other european cities

Cardiff’s hotel industry has proved more robust than that of any other UK city, according to a Deloitte & Touche report…

Cardiff’s hotel industry has proved more robust than that of any other UK city, according to a Deloitte & Touche report. The HotelBenchmark profitability* survey, which covers over 2,000 hotels across Europe, the Middle East and Asia, reveals that in 2001 Cardiff was the only UK city to show a rise in hotel profitability, with profits up 15 percent on 2000. London fared the worst, with profits declining by 15 percent, followed by Birmingham and Glasgow, which both dropped four percent in profitability. The survey reveals the full extent of the damaged caused to the hotel market by the events of last year, with profits falling eight percent across the UK as a whole, compared with growth of six percent in 2000.



Julia Felton, Travel, Tourism & Leisure director at Deloitte & Touche, said, The hotel industry was always going to find it hard to match the growth recorded for 2000 but economic and political events, compounded by foot & mouth, made the challenge impossible. Cardiff’s strong performance can be attributed largely to the pull of the Millennium Stadium as a sporting and concert venue, with hotel occupancy levels up 12 percent on last year.



In Europe, hotel profitability fell by six percent. Athens was hardest hit with a decline of 24 percent, indicating that the cost cutting measures that had helped achieved 47 percent growth in 2000 could not be sustained.





Dusseldorf, Hamburg, and Rome also suffered double-digit declines in hotel profits. However, there was considerable disparity across Europe. Paris, Milan, Prague and Vienna all showed positive growth, contrasting starkly with London‘s 15 percent decline. Paris proved the strongest hotel market in Europe, with profitability increasing by 18 percent mainly due to controlled cost management and exceptional demand during the Paris airshow.



Across the Middle East profitability levels fell 12 percent but the survey shows that hotels in this region are the most efficient at converting revenue to profit. Hotels in the Middle East retain on average 42 percent of every dollar as profit. This compares with 38 percent in Europe and 32 percent in Asia Pacific. Beijing was the only city in Asia where hotel profits rose, with growth of 13 percent (measured in US dollars). Sydney suffered the greatest fall (-32 percent).



Julia Felton added, Despite the decline in demand that started in April 2001 and continued steadily thereafter, hoteliers did not appear to start significant cost cutting measures until post-September 11th. It seems hoteliers thought they could weather the summer difficulties and that trading conditions would improve in the final quarter. Of course it was the September 11th events that forced the industry into taking drastic action, with many companies reducing their workforce and deferring capital expenditure plans. With revenues likely to remain under pressure even greater focus will need to be paid to cost structures if profitability levels are to be rebuilt.





*profitability measured as Income Before Fixed Charges per available room

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