Hotel industry enjoys revenue growth on supply constraints

25 August 2017 Consultancy.uk

The top ten UK hotel ten hotel brands operate 205,000 rooms, 54% of which are budget outfits according to new figures. Hotel owners have managed to boost the revenue per available room in a variety of markets, as demand outstrips supply, while new supply is expected to come online, it remains largely in the budget segment.

The hotel industry in the UK has shown steady growth so far this year, with areas of previously slow activity such as Newcastle and London showing increased revenue per available room. In AlixPartners’ ‘Q1 2017 Hotel Bulletin’; the consultancy explores how hotels in various regions are reacting to supply constraints and increased demand.

The study shows that most regions across the UK saw occupancy growth, year-on-year, in the first quarter of 2017. Belfast saw the biggest percentage increase, up 13%, while London saw modest growth, with occupancy up 5% as more and more people sought out the capital from China and the US. Liverpool too saw an increase in occupancy with a similar percentage to London. Birmingham, Manchester and Leeds were the slowest growers in England (all 2%), while Edinburgh was the lowest in Scotland, also at 2%.

UK hotel market

The increase in demand, with little change in supply, means that average room rates percentage changes tended to be positive across the 12 cities surveyed – with the exception of New Castle and Aberdeen. As such, in general, revenue per available room (RevPAR) was up in almost all cities, with Belfast booking the biggest increase, at 25%, while London and Liverpool followed on 11% and 10% respectively.

Top ten suppliers

The UK’s top 10 suppliers provide around 205,000 rooms, with the biggest share, at 132,000 (54%), budget rooms. Premier Inn is the biggest brand in the market, with more than 67,500 rooms in the budget segment, with growth running at 2.1%. Travelodge took the number two spot, with more than 39,500 rooms in the segment, while the budget brand of Holiday Inn owners IHG, HI Express, boasted more than 16,200 rooms.

Bedroom supply

2-3* properties represent around 15% of the top 10 market, with Holiday Inn, Britannia and Best Western the top players in the segment.

Pipeline

Undersupply, while boosting RevPAR, has the longer-term potential to result in lost revenues as cost-weary customers look elsewhere for accommodation. Various companies are therefore seeking to boost their available supply to better serve demand, as well as become competitive through scale.

The study noted that there is some difference between those adding significantly to supply in the coming years, and those in the top ten in terms of available rooms. Whitbread remains relatively active, with its Premier Inn brand continuing to add capacity in the coming years for a total of more than 11,800 rooms. Travelodge too is relatively active, boosting capacity by an additional 4,800 rooms approximately. IHG too will add considerably to its brands, at close to 4,000 new rooms, while Marriott International will see around 2,400 added to its capacity.

Bedroom pipeline

Around 31,600 new properties are in the pipeline meanwhile, with close to 8,200 due later this year, 7,400 due to come online next year, while announcements for projects in the following years, represent around 5% of total new supply.

In terms of wider market strategy assigned to the current pipeline statistics, the firm notes that a large portion of the additional supply in the top ten stems from the addition of budget capacity among the larger players seeking to compete. While some smaller players seek to add share. The higher star segment is relatively underserved with incoming new supply.

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Women remain underrepresented in UK's hospitality industry leadership

12 April 2019 Consultancy.uk

Female engagement at the top level of the UK hospitality industry is still lagging, with the vast majority of decision-making roles continue to be held by men. Only 7% of the industry’s FTSE 350 CEOs are women; however, the pay gap in hospitality and leisure is far better than in other industries, at a median of approximately 7%.

The hospitality, travel and leisure (HTL) sector is one of the UK’s largest employers, with 3.2 million people working in its segments. Despite a poor 2018 in terms of tightening consumer spending, the industry is still one of the top sectors in terms of economic activity, hitting £130 billion last year – besting the UK’s automotive, pharmaceutical and aeronautical sectors’ combined activities.

While the industry is one of the country’s largest employers, it still faces considerable issues around diversity at the top. New analysis from PwC has explored the matter, as well what initiatives the industry has engaged to open up its top ranks to a more diverse background.

Female representation at board level for UK companies and HTLs

According to a survey of CEOs, Chairs or HR Directors of over 100 of the most significant leisure businesses across the UK, the hospitality industry has a relatively male-dominated top level. This lags behind the FTSE 100, where companies have female board level representation at 32.2%. Meanwhile, the figure for the combined executive committee and direct reports stands at 28%. This is well above FTSE 250 levels, where female board level representation stands at 22.4% and executive committee & direct reports stand at 27.8%.

For the hospitality industry as a whole, board level representation came in at 23.6%, with FTSE 350 for the industry performing slightly better at 25.1%, while non-listed companies performed considerably worse at 18.2%. The firm notes that the figures hide that while some companies are making strides to improve equality, others are not moving forward – with the positive result reflecting more often the good work of some, while others are not taking the issue seriously in their agenda setting.

Blind spot

The study states, however, that while the overall numbers are relatively strong, the industry has a number of acute weaknesses. These include CEO numbers, with only 7% of HTL FTSE 350 companies helmed by women and 11% of non-listed companies led by female CEOs. Meanwhile, female chairs at FTSE 350 companies for the sector stand at zero. In terms of wider diversity representation, only 1 in 33 leaders at industry companies is from a BAME background.

Pay gap for HTL and hospitality

The report noted discrepancies between FTSE 100 companies and FTSE 250 in terms of improving the number of women at executive level. The majority have met the Hampton-Alexander Review target of 33% women at board level, up from around 25% in 2016. However, the remaining ~40% are not on target, and are unlikely to meet the target by 2020. A similar trend is noted when it comes to executive committee and direct reporting numbers.

Jon Terry, Diversity & Inclusion Consulting Leader at PwC, said, "To make real progress in diversity and inclusion, businesses need to elevate it onto the CEO’s agenda and align diversity & inclusion strategy to the fundamentals of the business."

Tracking progress FTSE 250 level

However, one area where hospitality travel and leisure companies are outperforming other companies in the wider UK economy, is the mean and median pay gap between men and women. PwC found that the median of the wider UK economy comes is approximately 14% – with upper quartile companies noted for a gap of low 20%, and lower quartile companies noted for differences of around 2%.

The median pay gap for HTL comes in at well below 7%, with the median close to parity. There are considerable differences, however, with hospitality at 7%, while travel comes in considerably higher, at 22%. The latter figure reflects fewer women in higher paid pilot and technical positions within the industry.