Can UK hotels maintain high occupancy rates?
Demand for hotel rooms is sensitive to so many factors ranging from macroeconomic conditions to the vagaries of external shocks such as the pandemic. One key metric for the hotel industry is the average occupancy rate each month. The latest figures are encouraging but the chill winds of recession threaten what has been a stronger 2022.
Occupancy rates are measured by the percentage of available rooms that are booked on any given day, week or month. Our chart shows monthly rates which peaked at 83% in July. And you can see that 2022 has been a better year than 2020 and 2021 which of course were badly affected by the covid pandemic which caused shut-downs and a collapse in overseas tourists visiting the UK.
Most of a hotel’s operating costs are fixed. So, maintaining high occupancy rates is crucial to their commercial success. Price discrimination helps them to achieve this.
Another key metric is revenue per available room - essentially a measure of average revenue per room booked. According to the hotel industry association, this increased by £12 to £127.90 in July, whilst rising £24 to £205.63 in the London market - the figures compare to a year ago.
To what extent will hotel chains such as Travelodge and Premier Inn be prepared to lower standard room rates if there is a severe tailing off in demand when the New Year arrives and people are reining in their spending.
Rising costs are hurting hotel profits. Energy prices have climbed sharply and last week the government announced a 10% rise in the National Living Wage taking it up to £10.42 per hour from Aril 2023.