UK hotels navigate slowdown in staycation market

An aerial view of Leeds city centre and railway station.
An aerial view of Leeds city centre and railway station. (Teamjackson/Getty Images)

Insight Comment
It’s going to be an interesting couple of months in the UK hotel market. Domestic leisure travel has held up pretty well during the pandemic but as we slip into winter, we’ll see whether talk of robust corporate demand will materialise in a sustained way.

UK hotels have managed to weather to end of the summer staycation market and produced a robust performance during September, according to new analysis by property consultancy Knight Frank.

The company looked at occupancies, average daily rate and profit to give a snapshot of the industry.

Occupancies

Domestic leisure demand propelled hotel occupancy to 66.2% in August for regional UK hotels, but in September the figure rose slightly to 67.9%, indicating healthy demand from domestic corporate demand, project work and transient business-related travel.

Year-to-date occupancy has outperformed the 2020 occupancy rate for the same period, reaching 39.4% compared to 34.1% in 2020, despite the extended lockdown at the start of the year.

For London, the pace of recovery whilst improving has been slower, with year-to-date occupancy reaching 21.7% versus 25.1% for the same period in 2020.

ADR 

Whilst London’s occupancy has been steadily improving each month, the city cemented its recovery with 17.6% growth in its average daily rate (ADR) performance for the month of September, following an uplift from the resumption of international visitors arriving at Heathrow Airport.

For regional hotels, the ADR has increased by 81% since the beginning of May 2021 to £107, a 17% increase on September 2019.

In September 2021, RevPAR for regional UK hotels, reached its highest level since September 2019 at £72.60, whilst the London hotel market achieved a 37% month-on-month uplift in RevPAR for September to £82.70, its best performance since February 2020.

Profit

Regional UK hotels have witnessed an uplift in gross profit per available room (GOPPAR) of 30% in the two-month period of August and September, rising to £43.80 in September, on par with profits achieved in September 2019. Meanwhile, the London hotel market, whose performance has been impacted much more severely than compared to regional UK, has further ground to recover. Yet, the city’s GOPPAR revival has enjoyed a robust start, almost doubling in a month, rising to £48 in September 2021, but remaining 56% below its historical performance of September 2019.

What They Said

Philippa Goldstein, senior analyst, hotels and leisure at Knight Frank: “The easing of covid-19 restrictions and with significant pent-up leisure demand, hotel fundamentals have continued to improve during the summer months and early autumn. How the pandemic plays out this winter will be fundamental to the short-term prosperity of the UK hotel sector. With flexible room rates and free cancellation now widely available, any change in government messaging can rapidly impact upon forward bookings.

“Critical to the ongoing recovery of the sector, will be the transition from predominantly leisure-based demand, to a mix of leisure and typically higher yielding corporate, meetings and events business. The ability to secure room nights from a much broader and balanced segmentation mix is essential if the sector is to resume the year-round high levels of occupancy and ADR performance enjoyed pre-pandemic.”