Hotel occupancy holds strong in August but staff costs bite
UK hoteliers managed to uphold strong occupancy in August, but staff costs continued to bite, with profitability taking a hit, according to the RSM Hotels Tracker.
The data, which is compiled and produced by Hotstats and analysed by RSM UK, shows occupancy of UK hotels increased from 81.4% to 82.1% in August year-on-year, and rose slightly from 84.2% to 84.5% in London.
Despite this, hoteliers weren’t able to increase room rates, with average daily rates (ADR) of occupied rooms being flat in the UK (£155.20 vs £154.98) in August year-on-year and down from £214.86 to £210.77 in London.
This meant gross operating profits of UK hotels also fell from 38.1% to 37.5% in August year-on-year and from 41.2% to 39.9% in London.
However, Scotland bucked the trend, with occupancy reaching 87.2% in August, overtaking both the UK and London, and room rates soaring to a seven-year high of £206.91.
Chris Tate, partner and head of hotels at RSM UK, comments: “August was a mixed month for the UK hotel sector. Despite strong occupancy levels, hoteliers weren’t able to keep upping their room rates. This, combined with higher staff costs, meant operating profits suffered. The good news is that hotels were able to enjoy a good summer, which for some, will have been key to help see them through the quieter months to come.
“Scotland had a particularly strong month, likely helped by the Edinburgh Festival Fringe and Oasis concerts which provided a double boost to the country’s hotel market. With hotels in the capital essentially being at maximum capacity, this meant they could hike room rates to take advantage of strong demand, demonstrating the importance of major events to both the industry and wider economy.”
Thomas Pugh, economist at RSM UK, said: “The overall positive performance for the hotel sector over the summer and an increase in hospitality sales in August according to the CGA RSM Hospitality Business Tracker, suggests that output in the food and hospitality sector rose by 0.6% m/m in August, which should help the economy to recover after stagnating in July.
“Admittedly, the outlook further ahead looks more challenging. Inflation rising to 4% at the same time wages are slowing means more gradual real income growth, and it looks like further interest rate cuts will have to wait until next year. The big question, though, is how much speculation about tax rises in the budget will undermine consumer confidence and prevent consumers from spending.
“That said, the outlook for 2026 looks a bit rosier. The worst of the inflation and labour market pain should be behind us by then and with the saving rate at a historically high level there is plenty of scope for households to save a bit less and spend a bit more, assuming, of course, that the budget doesn’t hand us any unwelcome surprises.”