During the first quarter of 2009 London's average occupancy rate of 76 per cent was the highest among ten major cities in Europe while its average room rate ranked fifth at €140.40. Compared to London, the cities of Paris, Amsterdam, Vienna and Berlin reported higher average room rates but far lower occupancy rates with Vienna's being the lowest at 53.1 per cent and Paris the highest of the four at 68.8.
According to David Bailey, deputy managing director of TRI Hospitality Consulting, “price promotions and the low value of sterling are stimulating leisure tourism to London which is providing some compensation for the fall in corporate bookings. The overall damage to hotel profits is less pronounced in the English capital than in most other European cities.”
Compared to Q1 2008, Q1 2009's daily hotel profits, as reported by a sample of four- and five-star London establishments and stated as IBFC (income before fixed charges), had fallen by 9.5 per cent to €68.52 per available room.
London's hotel room occupancy rate is still the highest in Europe
Profits took a much sharper dive in cities such as Paris, Amsterdam and Vienna where drops of 30.7, 36.6 and 47.5 per cent were registered, respectively. According to the survey, Hamburg was the only city that achieved growth in profits and occupancy rates. There, IBFC rose 3.6 per cent to €31.23 per available room while occupancy climbed 2 per cent to reach a total of 64.2 per cent.
As Bailey explains, “many Germans opted for short domestic breaks at the start of the year instead of holidaying abroad. In addition to art exhibitions, musicals and shopping, tourists come to Hamburg to visit HafenCity, a huge waterfront development of housing, offices and cultural facilities that is destined to increase the size of Hamburg’s city centre by 40 per cent.”
Hamburg's tourism market has experienced a substantial boost of late, the city's tourist board reporting a surge of 4.7 to 7.7 million annual overnight stays between 2001 and 2008. One of the keys to London and Hamburg's relative success was their effective management of payroll expenses. Hamburg hotels reduced the portion of their expenses devoted to payroll between the first quarters of 2008 and 2009 from 35.2 to 34.5 per cent, while London managed to shrink its payroll footprint by 0.7 per cent and achieve the lowest margin of all: 27 per cent.
Evaluating progress across the years, the only city where rates climbed during Q1 was Warsaw. Here, average room rates rose to €86.58 upon a slight 0.7 per cent increase. Thanks to adequate control of payroll expenses their profits slipped only a moderate 6.2 per cent to €31.55 per available room.
Considering Q1 2009 results alone, London's hotel market ranks as the most profitable. Its average daily IBFC per available room registered at €68.52, while second-place Paris' IBFC was considerably lower at €40.31.
