Knowledge & Insight

What´s driving occupancy levels in the hotel sector?

Tue 24 June 2014

The hospitality sector has been on something of a rollercoaster ride in recent years. Occupancy rates in London remain strong, yet a steady stream of new supply is keeping average daily rate (ADR) and revenue per available room (RevPAR) far below the highs reported during Olympic year. Other factors driving fluctuations in performance include changing economic conditions, technological innovation and evolving customer behaviour.

Economic factors

RevPAR is traditionally closely correlated with GDP growth, and the strengthening economy is certainly having a positive influence on rates. Yet there are other compelling factors propelling rates in the opposite direction. Pressure on consumers’ disposable incomes has driven push-back from customers who increasingly seek greater value, while the growth in the budget sector has eased demand on premium brands.

Event-driven demand

When Manchester hosted the Commonwealth Games in 2000, the city’s hotels enjoyed their highest ever occupancy rates, and there’s no reason to suggest Glasgow won’t experience a similar spike in demand. The challenge for the industry is to use the momentum from such an event to move forward and drive sustained growth. A natural market response to a large event is to increase supply, providing a short-term boost in revenue yet potentially causing long-term excess supply. However, since the financial collapse of 2007 and 2008, the hospitality industry has struggled to finance many new projects outside of London, and this is likely to dampen any potential excess supply scenario in Glasgow post Commonwealth Games.

Performance around the UK

Performance across other UK regions has varied significantly, driven chiefly by regional economic performance, changes to room supply levels, and increasingly by local events. Liverpool provides a prime example of event-driven performance, as events such as the International Festival of Business have driven a marked spike in occupancy. There has also been a significant change in behaviour both from corporate and leisure customers, as late booking increasingly becomes the norm. Leisure customers in particular are displaying a growing appetite for late deals, while the pricing transparency delivered by online booking portals has driven further discounting as hoteliers seek to maximise occupancy at the expense of margin.

Hospitality executive recruitment

The hospitality sector faces many challenges over the next decade, yet the opportunities are just as compelling. To succeed, companies must have the agility to respond to changing market conditions, to maintain standards of service despite pressure on costs, and to compete effectively in an increasingly digitised marketplace. To do all this, they must have talented leaders with the experience to manage operations efficiently and the ability to out-innovate the competition. Identifying and recruiting such individuals requires the services of a specialist.

Stone Executive is an experienced hospitality executive recruitment firm with a proven track-record of identifying and engaging with the finest talent in the business. Our hospitality headhunters are experts in hospitality executive search, boasting a professional network that spans the world’s biggest hospitality companies and high-end boutique brands. Our Glasgow office is particularly well equipped to help companies recruit senior level hospitality staff to support and drive new growth in the post-Commonwealth Games era.

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