UK room rates surpassed the GBP100 mark to reach GBP100.58 for the first time last year, growing 3.4% on the year, according to BDO’s Hotel Britain report.
The study was hopeful of a boost from staycations this year but cautioned over the proliferation of brands.
Occupancy remained flat in 2017, decreasingly slightly by 0.5%, due to the influx of new supply in both London and the regions.
Robert Barnard, partner at BDO, said: “2017 proved to be another year of consistent growth for UK hotels. The strong performance demonstrates the industry’s robustness despite facing EU uncertainty, an increase in supply and the impact of several terror attacks across the country which occurred during the first half of the year.
“There will undoubtedly be challenges ahead. Rising payroll costs – such as the National Minimum Wage, the Living Wage and increased pension contributions – will impact the bottom line for many businesses. However, hoteliers with robust business strategies will continue to plan and adapt to the changing environment.
“The hotel industry will hope to continue to benefit from the weak pound, which will attract overseas visitors and, indeed, the domestic market as the UK continues its ‘staycation nation’ status.”
The report was released shortly before Deloitte’s Leisure Consumer Q1 2018 report, which found that consumers reported spending more on both long holidays and short breaks, by six and five percentage points respectively, which was attributed to the inclement weather.
However, when asked about their spending intentions for the next three months, consumers said they were planning to spend less money, on long stay and short break holidays, which was described as being “significantly lower” compared to the level seen last year, falling by 10 and eight percentage points respectively.
BDO had a note of caution for operators looking to growth, adding: “As brands race to grow their market share, we have seen significant activity leading to brand acquisition on the premise that this allows increased loyalty, creates scale and customer touchpoints as well as potential earnings and driving greater negotiating power with OTAs.
“But we advise some caution with this approach; the days of growing the number of brands in a stable are over and hotel owners should consider how many brands they can sustainably and profitably maintain.”
Commenting on whether there were too many brands, James Bland, director, hotels & hospitality, BDRC Continental, told Hotel Analyst: “On the demand side, greater individualisation, rejection of ‘same old, same old’ and demand for unique experiences continues to support the case for more brands. Granted, these seem to be, more often than not, soft ‘collection’ brands but still they add to the mixture that are in play and the choice for the consumer. Analysts may want fewer brands because it might make their lives a bit easier, but nobody really expects consumers to be aware of every brand out there – nor should that be the aspiration for all but the few genuine behemoths – so it’s now as much about portfolio penetration as anything else. That’s why we see ‘by Hilton’ and ‘an IHG Hotel’ becoming more common, and advertising campaigns that cover portfolios rather than single brands – AccorHotels’ fantastic ‘from the heart’ advert is a prime example.
“On the supply side, the need to circumnavigate non-competitive regions, broaden the reach of the overall system and protect the, now mostly intangible, balance sheet by spreading risk hasn’t gone away. It would also require a fairly large about-turn for the big brand houses to now change their minds and claim that, actually, they have too many brands. Given how much has been said, publicly, about adding – or, in the case of Marriott, maintaining – brands, it’s the sort of U-turn that could potentially undermine investors’ confidence in leadership and strategy.
“In the last few months IHG announced Avid, acquired Regent and were said to have been sniffing around Principal. Just last October, Hilton disclosed that they have four new brands in ‘heavy development’ while AccorHotels announced that they’ll be welcoming Moevenpick to the family, so if the days of adding brands to a stable are truly over, then they literally only ended within the last couple of hours.”
HA Perspective [by Katherine Doggrell]: Just as the OTAs were starting to persuade owners that the only brand they needed was them, the operators upped their game and started spewing out brands like Kit Kat chucks out, well, new Kit Kats. But before you start to question who could possibly need a Green Tea Kit Kat, the answer is that someone does.
And, as Bland points out, the operators are now promoting themselves as a collection of brands, rather than promoting each brand individually, which plays into their loyalty programme strategies well. The consumer wants choice and the consumer is king.
Where the question is less clear is the owner. The proliferation of soft brands has given many independents the chance to access distribution without the bother of changing, well, anything in the hotel. That’s great if you’re next to the Trevi fountain, it’s less wonderful if you are somewhere just outside Wolverhampton, in one of the locations where owners and lenders agree needs a brand.
A frequent cry at conferences is that contracts will be shortening and the range of franchises out there will mean that owners can feel themselves more empowered. But the fact remains that those days are not here yet. It costs money to brand a hotel and, as taxi drivers will tell you, frequent rebranding does no-one any favours. Full-service brands may find themselves a harder sell as choice grows.