Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}
London London

Hotel Market Spotlight: London

Lise Keller • 20/11/2023

Despite lower occupancy and headwinds of rising costs, notably wages and utilities, the fact that London hotels have nonetheless increased profitability is testament to the enduring demand fundamentals, driving exceptionally strong rate growth. With Sterling likely to remain weak, and inflationary pressures easing, profitability prospects for London hotel investments are strong and emphasises the attraction of London hospitality as a sector likely to outperform.

London Hotel Market Overview 

Despite the growing costs and occupancy remaining 3.7 percentage points below 2019 levels, there has been a 5% increase in Gross Operating Profit per Available Room (GOP PAR) compared to 2019. 

Operating expenses saw a notable 19% rise, driven by increases in utilities, other expenses, and payroll; however, this was effectively countered by robust revenue growth (+12%), fueled by a substantial 22% increase in Average Daily Rate (ADR). While the rooms department thrives, the Food and Beverage (F&B) sector grapples with challenges, marked by escalating costs and declining revenue, particularly in beverage sales, which witnessed an 11% drop. Nevertheless, the market maintained a healthy GOP margin, reaching 44%.

 

F&B Revenue Declines As Costs Continue To Grow 

 

 

Utilities Costs 

The London market experienced a noteworthy surge, with electricity costs witnessing a remarkable 120% increase and an overall 106% growth in utilities per available room (PAR). Consequently, these escalating costs led to a shift in utilities' share of total revenue, rising from 2.4% to 4.4%. Looking ahead, there is optimism for a moderation in utilities rates by 2024, as declines in wholesale energy prices are anticipated to impact commercial contracts during the renewal process. 

Payroll Costs 

Since 2019, payroll costs have seen a significant increase of 15%, primarily driven by an escalation in non-management salaries and wages. Notably, the rooms department led this surge with a substantial 30% increase in payroll costs, surpassing the 11% increase in the Food and Beverage (F&B) sector and the 3% in Admin and General. This growth is attributed in part to the rise in the National Living Wage in April 2023, coupled with increasing pressures to retain staff amid the prevailing rise in the cost of living. Anticipated National Living Wage increases in 2024 are expected to contribute to further growth in payroll costs. 


Other Expenses  

The category of "Other expenses" exhibited a notable increase of £8.1 per available room (PAR), marking a 17% rise, which falls below the overall Consumer Price Index (CPI) growth of approximately 24% during the same period. This highlights effective cost management strategies implemented over time. The primary contributors to this expense escalation were identified in the subcategories of Rooms Other Expenses and Sales & Marketing (S&M) Other Expenses. 

Contacts

Lise Keller
Lise Keller

Consultant
Prague, Czechia


+41 (78) 8764114

Download VCard

Edward Fitch - London
Ed Fitch

Partner
London, United Kingdom


+44 (20) 71525850

Download VCard

Carl Ridgley - London
Carl Ridgley

International Partner
London, United Kingdom


+44 207 152 5436

Download VCard

Richard Candey - London
Richard Candey

Partner
London, United Kingdom


+44 207 152 5468

Download VCard

Related Insights

pillows on hotel double bed
Research

Hospitality Market Trends & Data

The latest hospitality market insights are based on the in-depth analysis of our extensive data sets, surveys of investors, operators and lenders and up-to-date market intelligence from our team members on-the-ground in all major European markets.

Bořivoj Vokřínek • 09/01/2024
MyCity thumbnail card
Research

MyCity Reports

Our local experts and research leads have created in-depth research reports on the future of six UK cities: London, Birmingham, Bristol, Manchester, Leeds, and Edinburgh.
08/11/2023
Beach Chairs by Ocean
Insights

Operator Beat – Europe 2023

The Operator Beat surveys were conducted among over 195 senior executives of leading hotel operators active in Europe.
30/10/2023

LOOKING FOR SOMETHING SPECIFIC?

Get in touch and we can assist with any additional information you need.
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Cookies.
MORE OPTIONS
Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS