CoStar Analytics
Economy and Midscale hotels hit a new revenue per available room record for January, according to preliminary results.
Outperformance at the budget end of the market during the second half of 2022 has carried over into this year as occupancies and rates smashed their pre-pandemic performance, pointing to a strong 2023 for the likes of Premier Inn and Travelodge.
The sector has been one of the most successful coming out of the pandemic and the outlook remains positive. Despite a cost-of-living crisis, consumers are still prioritising spend on services and experiences, such as travel and hospitality. Hotels at the lower end of the class spectrum are likely to continue having an advantageous position as value-for-money propositions become critical given the squeeze on discretionary consumer spend.
The trend has been emphasised by the positive messages from earnings calls from both Whitbread and Travelodge, the sector’s largest operators, earlier in January. Whitbread posted a 37% growth on accommodation sales for the third quarter of the final year 2023 (13 weeks to 1 December 2022) on pre-pandemic levels with further confidence on forward-bookings, despite their shorter booking windows. Travelodge also posted a total revenue increase of 35% on 2019 levels for the first three weeks of January.
Both cited the robust leisure return in being key to driving revenues with the rebound in business travel also supporting strong occupancy growth over the past 12 months and in the year ahead. White-collar workers have returned to Whitbread’s estate while blue-collar employees have kept Travelodge properties busy, with the corporate sector’s recovery becoming even more vital in the coming months.
Uplifts to inbound visitation are set to positively affect the sector too, especially those in London. The weak pound has attracted a significantly greater number of overseas visitors to the country and such a trend has been noted by Whitbread which reported seeing a rise on searches and visits to their websites from other areas of the world too, including those outside of Europe, with many translating into bookings.
Inflationary pressures are set to continue, but efficient operators are likely to succeed. The two leading hotel groups have reported that despite rising costs over the coming financial years, they remain confident that increasing revenues combined with a successful expense management programme is likely to offset cost growth.
cbalekjian@costar.co.uk