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The national minimum wage increase, amongst other cost pressures, is hitting the bottom line of UK hotels despite them charging higher room rates, according to the latest RSM Hotels Tracker.
In light of this, the report found that labour costs per available room were up from £15.32 in March to £16.62 in April in the UK, whilst rising from £20.65 to £22.16 in London.
However, gross operating profits (GOP) of UK hotels remained flat at 31.4% in April and 36.8% in London, largely in line with the same month last year but lagging behind pre-pandemic levels, highlighting the national minimum wage hit to the bottom line.
Occupancy was flat year-on-year in the UK at 74.5% in April, but reached 78.4% in London, up from 77% the previous year. Occupancy rates continued to creep back up to pre-pandemic levels of 77.6% (UK) and 79.7% (London).
Meanwhile, average daily rates of occupied rooms were flat year-on-year in the UK at £139.51 in April, but down from £207.86 (April 2023) to £203.81 (April 2024) in London.
However, RSM found that room rates are “significantly” exceeding pre-pandemic levels at £110.24 (UK) and £169.76 (London). RevPAR of UK and London hotels were static last month when compared to the previous year however, at £103.90 and £159.72 respectively.
Chris Tate, head of hotels and accommodation at RSM UK, said: “While UK hotels have been able to charge higher room rates when compared to pre-pandemic levels, they’re seeing little of this making its way through to the bottom line.
“Ongoing cost pressures, the latest being the increase in national minimum wage, are chipping away at their operating profits. For some hoteliers, the fierce competition for hotel staff over the last couple of years has meant they are already paying above minimum wage. However, a rise in NMW has a knock-on impact as it ripples through the rest of the workforce as higher paid staff demand similar percentage increases.”
He added: “The weather continues to dampen demand. But there’s hope this will change as we enter into the summer months. With better weather on the horizon, inflation set to fall back to the Bank of England’s 2% target in June and real wages rising, consumer confidence should continue improving, which will bring some summer cheer to the hotel industry.”
