UK Hotels Enjoy Booming Summer: Eras Tour and Confidence Drive Profits

The UK hotel sector enjoyed a strong June, with improving consumer confidence and the impact of Taylor Swift's Eras Tour boosting demand and profits, according to the RSM Hotels Tracker.

The data, compiled by Hotstats and analysed by RSM UK, revealed a slight increase in occupancy, rising to 81.9% in June from 81.4% the previous year. While this remains below pre-pandemic levels of 85.3%, it signifies a positive trend. London saw a particularly encouraging performance, with occupancy hitting 84.8%, exceeding last year's 82.6% but still lagging behind the 2019 figure of 87.6%.

The average daily rate (ADR) for occupied rooms across the UK reached a record high of £175.91 in June, up from £169.08 the previous year. London room rates also increased, reaching £256.40 compared to £254.16 in 2023. This translated into a significant increase in RevPAR (Revenue Per Available Room) for UK hotels, rising from £137.55 to £144.14 year-on-year. London saw an even more substantial increase, with RevPAR jumping from £209.89 to £217.54 in the same period.

The positive performance translated into healthy profits, with UK hotel gross operating profits (GOP) climbing from 42.8% in June 2023 to 44.5% in June 2024, surpassing pre-pandemic levels of 44.3%. London also saw a rise in GOP, reaching 50.3% in June, up from 48.2% the previous year but remaining flat compared to 2019 (50.4%).

Chris Tate, head of hotels and accommodation at RSM UK, highlighted the sector's resilience in the face of cost pressures, noting a potential easing of these costs which could provide some respite for hoteliers. He also pointed to the return of consumer confidence, with a clear preference for UK travel despite the lack of sustained summer sunshine.

Tate credited Taylor Swift's Eras Tour with boosting demand, particularly in Scotland, where room rates saw a noticeable uptick. This trend is expected to continue in London in July, with "Swifties" from around the globe descending on the capital.

With improved weather on the horizon and a continued economic recovery encouraging spending, Tate expects a strong summer for the hotel sector.

Thomas Pugh, economist at RSM UK, attributed the strength of accommodation prices to the recent rise in services inflation, which rebounded to 7% after dipping to 4.5% in January. He sees the positive hotel sector performance as further evidence of a robust economic recovery, driven by improving consumer confidence and real disposable incomes.

Pugh anticipates continued growth in consumer spending in the latter half of 2024 and into 2025, further bolstering demand for hotel rooms. However, he acknowledges the ongoing price pressures within the industry, with inflation in the accommodation sector running at around 7% compared to the overall inflation rate of 2%.