Energy costs for UK hotels have doubled in four years, RSM finds

Energy costs for the UK hotels sector in 2022 have doubled in four years, according to the RSM Hotels Tracker.

The data, compiled and produced by Hotstats and analysed by RSM UK, shows the cost of utilities (water inclusive) peaking at £8.03 per room in February 2022, and although falling slightly to £7.21 in March and £7.25 in April, it said this is still a “significant uptick” of 49% when compared to pre-pandemic levels and nearly twice the cost in 2018.

It also found that occupancy rates of UK hotels saw a marginal increase from 60.4% in March to 62.8% in April and have been increasing consistently since the Omicron-related dip in January.

Scotland and Wales saw 9% and 7.3% jumps in occupancy, respectively, however, UK occupancy still sits behind pre-pandemic levels of 77.7%, largely due to reduced international and business travel and depressed figures in London offsetting the national average.

In addition, it found Average daily rates (ADR) in UK hotels dipped from £128.78 in March to £122.55 in April, but surpassed pre-pandemic prices of £110.58 in the same period in 2019. Revenue per available room remained flat this month at £77.01 in April – but is nearly £9 lower than April 2019 rates.

Chris Tate, head of hotels and accommodation at RSM UK, said: “With energy costs for the hotels sector reaching record highs combined with other inflationary pressures, the fear is that the worst is still yet to come. VAT rate relief also came to an end in March, which may explain why average daily rates in April have dipped, suggesting that hoteliers are absorbing the VAT increase and additional costs themselves, but this can only last for so long.

“Hotel businesses may have to eventually pass on the myriad of increased costs to consumers, which will undoubtedly be a difficult route to take given that consumer confidence has reached a 40-year low due to the cost of living crisis. Unfortunately, future bookings may take a hit as a result.”

He added: “There are hopes for a busy summer period as international and business travellers return to the UK combined with a staycation boost if price inflation leads to more consumers holidaying in the UK. Although this will be positive news for the UK staycation market, accommodation prices are also increasing and so, this may not be a cheaper alternative in the end.

“What is clear is that hoteliers are facing a number of headwinds whilst trying to gear up – it will be interesting to see how they overcome these challenges, but for now, the outlook for the sector looks uncertain.”