UK hotel profits return to pre-pandemic levels

UK hotel profits returned to pre-pandemic levels as a result of the hottest May on record, according to the RSM Hotels Tracker.

Despite some wet weather, gross operating profits (GOP) of UK hotels reached 38.9% in May, up from 37.3% in the same period last year, surpassing pre-pandemic GOP of 38.3%.

In London, GOP was 43.4% in May, an increase from 42.9% last year and 42.5% in 2019.

Occupancy of UK hotels was also up from 76.3% to 79.6% in May year-on-year but slightly behind pre-pandemic levels of 80.1%.

London occupancy reached 82.9%, overtaking occupancy of 78.2% last year and 79.2% in 2019.

However, average daily rates (ADR) of occupied rooms fell from £154.04 (May 2023) to £153.38 (May 2024) in the UK and from £229.04 to £216.80 in London in the same period.

RSM also found that Room rates continue to be “significantly higher” than pre-pandemic rates of £118.41 in the UK and £174.25 in London.

RevPAR was also up slightly in the UK from £117.60 to £122.05 in May year-on-year, but was flat in London at £179.78 in May.

Chris Tate, head of hotels and accommodation at RSM UK, said: “While the hottest May on record didn’t feel like much of a scorcher, it was a strong month for the UK hotel industry. The combination of improving consumer confidence, real wage growth, tax cuts and a fall in room rates, is filtering through to demand, further boosted by the two bank holidays in May. Although the recent rise in national minimum wage hit the bottom line for hoteliers in April, it appears they’re managing to offset these costs with increased occupancy.

“Despite room rates being much higher than prior to the pandemic, it’s clear they’re starting to plateau. That said, gross operating profits of UK hotels are on the up, so much so that they’ve overtaken pre-pandemic levels. The good news looks set to continue for the sector, as RSM UK’s latest Consumer Market Outlook found consumers are planning to cut back on overseas breaks but continue treating themselves to a staycation in the UK.”

Thomas Pugh, economist at RSM UK, added: “The positive results for the UK hotel sector in May is another piece of evidence pointing to a strong rebound in May after a bleak April. It appears that stronger consumer confidence and an improvement in real disposable incomes is feeding through into increased demand for everything from retail goods to hotel rooms.

“We expect consumer spending to continue to improve through the second half of this year and in 2025 as real incomes rise, which should support demand for hotel rooms. However, with inflation in the accommodation sector running at around 7%, compared to 2% inflation overall, price pressures in the industry are clearly still an issue.”