PERFORMANCE
IN THE U . K ., can RevPAR growth give cover to GOP margin ?
By KATHAKALI NANDI
After the U . K . hotel industry saw a stronger-than-estimated performance in 2022 , continuing inflationary headwinds in F & B , energy and payroll are likely to impact the recovery of the country ’ s hotel industry , according to a PwC report .
Performance rebounded this April , particularly in London , following a weaker-than-predicted first quarter . Given the continuing robust business on the books , the U . K . hotel market is projected to achieve the better performing “ mild ” end of the 2022- 2023 forecast for London and the regions , PwC said .
In 2024 , downward pressure on room rates is expected to limit hotels ’ ability in the regions to continue to absorb the costs by increasing prices . This can be attributed to a change in customer demand for lower-priced corporate and group business , an oversupply of new rooms and the continuing pressure on consumer spending . Hotels should focus more on radical and transformative ways to take out cost and improve operating efficiency , the report suggested .
INCREASE IN LABOR COSTS The National Living Wage ( NLW ), which increased by 16 % from
March 2020 to March 2023 , the staffing shortage , the heightened dependency on agency staff and lower occupancy levels all contributed to the 15 % increase in total hotel labor costs per occupied room from before to after the pandemic .
Labor costs are predicted to continue to climb through the year as hotels respond to the increase in NLW . The NLW-drive rise in labor cost is likely to affect profitability in the regions more adversely , with the addition of at least 10 % to payroll costs this year compared to 2022 .
Payroll costs are also expected to be accelerated by rising occupancy levels as the necessary extra headcount will result in increased wages and salary costs compared to previous years .
IMPACTED PROFITABILITY The overall impact of inflationary cost pressures has affected GOP margins for hotels across London and the regions before and after the pandemic . Hotels in the regions were more adversely affected as their cost inflation was not adequately covered by growth in RevPAR in London .
For this year , PwC expects a stagnating GOP margin in London
80 hotelsmag . com Jul / Aug 2023