UK hotel RevPAR turns negative for first time in three years

April hotel performance has suggested a mixed picture for hotels across the UK, as RevPAR dipped by approximately 2%, according to CoStar data. Occupancy and rates posted their first decline in April in 36 months, likely driven by shifts to Easter and school holidays. April was also one of the wettest months, likely deterring British consumers from travelling closer to home. Out of the 40 markets CoStar tracked about 30 reported declines in RevPAR performance over the past month. Domestic tourist destinations such as Cumbria, including the Lake District, York, and East and West Yorkshire, were some of the “worst hit”. The latter experienced a double-digit revenue loss, driven by a 9% average rate drop. By contrast, Birmingham was the clear “outperformer” as revenues grew by nearly 11%, as occupancy and rates made gains on the previous year. Improvements to performance within the Birmingham market have been primarily led by hotels in the outskirts of the city centre, with those in the Birmingham East/Airport/NEC submarket experiencing a 19% RevPAR uplift, as average rates exceed £100 in April. A busy calendar of events in and around the NEC has supported hotels in this submarket, with local supply being able to cater for those attending events in the area, which limits overspill demand into the city centre. According to CoStar’s data, Edinburgh also remained a top performer among the regional markets as hotels in the Scottish capital continue to achieve RevPAR growth, with these only being second to London in absolute values, as average rates grew by approximately 8% year on year. The data suggested that the upcoming months are expected to be robust for hotels in the city, likely exceeding 2023’s performance, as Taylor Swift comes to perform for three nights, while the summer festivals and Edinburgh’s “popularity” with domestic and international visitors are likely to continue drawing elevated levels of demand, while supply additions remain limited. Meanwhile, northern cities such as Newcastle and Glasgow also stood out. Despite experiencing significant supply additions in recent years, Glasgow has absorbed new rooms “relatively well”, with events bolstering performance in the city while also benefiting from Edinburgh’s overspill. Newcastle, on the other hand, has not experienced increases in room inventory and has benefitted from a “strong rebound” in corporate business, also driven by improvements in the group segment in April. At the other end of the spectrum, Cardiff hotels have been struck with softer demand patterns compounded by increasing inventory, as approximately 720 rooms were delivered in the past three years. Additionally, hotels in the Welsh capital may have also been negatively affected by a lack of events in April, which bolstered the performance of hotels in the city in the previous year. The city’s performance tends to be event-driven, with Taylor Swift’s ERAS tour also set to positively impact hotels here. Occupancy on the books for the night of the concert was around 82% as of 20 May, which is expected to push pricing to some of its highest levels, while the night of Billy Joel’s concert at the beginning of August is at around 93% occupancy. Overall, the data highlighted that hotels across the UK are expected to have a mostly positive year. However, performance has been mixed across the country, depending on the market. Most regional cities have experienced stronger demand patterns compared to London, which to date has seen a slowdown in performance. Forward bookings also point to a normalisation in trading, supporting stable revenue growth for the year ahead, which could pose some challenges in profitability despite inflation’s downward trajectory.