Room for growth

Hotels push up prices as holidays remain priority

George Hotel
Hotels are seeing a rise in demand

Hotel prices have risen as demand for holidays remains high despite the cost of living squeeze.

Occupancy levels, average room rates and gross operating profits rose in April, as the sector ramps up for the summer season, according to the RSM Hotels Tracker.

The data, which is compiled and produced by Hotstats and analysed by RSM UK, shows occupancy rates of hotels in Scotland rose from 65.4% (March) to 70% (April) and were up from 68.7% to 71.2% in the UK.

Average daily rates (ADR) of occupied rooms jumped from £101.9 (March) to £117.27 (April) in Scotland, while rates of UK hotels increased from £135.69 to £142.73. Room rates are up 10% in Scotland and 16% in the UK when compared to the same month last year.

Revenue per available room (RevPAR) saw a significant increase from £66.7 (March) to £82.11 (April) in Scotland and was up from £93.23 to £101.57 in the UK. Gross operating profits (GOP) of rose 5% to 24.8% in Scotland last month but fell 0.5% to 31.4% for UK hotels.

Stuart McCallum, partner and regional head of consumer markets in Scotland at RSM UK, said: “Visitors to the key hot spots in Scotland are helping improve the performance of the hotel sector. This looks set to continue with the onset of summer, particularly with big draw events such as the UCI championships, golfing tournaments and the Fringe festival, which will be key in driving consumer demand.

“Hotels are still tackling rising costs and soaring inflation but it’s encouraging to see demand increasing which means hoteliers can occupy rooms without the need for heavy discounting.

“This is also having a positive impact on the bottom line, which will come as a good flip for the sector as businesses start to rebuild their balance sheets.

“While there’s reason for optimism as consumers choose to spend on going out and on leisure, hoteliers need to be flexible and agile. With another interest rate rise on the horizon, the rest of the year will be far from plain sailing.”

Thomas Pugh, economist at RSM UK, added: “Falling inflation, a drop in energy prices, and a tight labour market means consumers’ real earnings should start rising again in Q3, which will support demand. What’s more, consumers still seem to be prioritising experiences over goods, which should further support demand for hotels.

“However, concerns about sticky inflation mean that interest rates are likely to rise to 5%, or even a little higher, raising the risk that the UK goes into a recession later this year or early in 2024. That, of course, would offset any benefit of falling inflation on consumer spending.

“There are reasons to be optimistic about the second half of this year, but only cautiously so.’

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