Luxury hotel market boost as consumers trade up
The luxury hotel market continues to go from strength to strength, as the cost-of-living dissipates and consumers upgrade their choice of hotel, with the budget market being hit the hardest, according to the RSM Hotels Tracker: Focus on Asset Classes.
The data, which is compiled and produced by Hotstats and analysed by RSM UK, shows occupancy of UK luxury hotels rose from 68.2% in 2023 to 69.8% in 2024 and from 75.8% to 78.1% for mid market hotels, but fell from 78.5% to 75.3% for budget hotels.
Average room rates of UK luxury hotels jumped from £327.33 in 2023 to £358.69 in 2024, and was even greater in London, increasing from £388.85 to £432.06. Mid market hotels in the UK saw room rates increase slightly from £133.03 in 2023 to £135.75 in 2024, but rates were flat for budget hotels at £97.77.
Gross operating profits (GOP) per available room of luxury hotels in the UK were up from £114.05 in 2023 to £127.50 in 2024 and jumped from £139.00 to £154.69 in London. The UK mid market GOP increased from £50.15 to £54.96 but was down slightly from £35.07 to £34.10 for budget hotels.
Chris Tate, partner and head of hotels at RSM UK, comments: “The luxury hotel market was the big winner across hotel classes in 2024, with London in particular booming at the expense of budget hotels. As the cost-of-living pressures eased, travellers started to shift away from the lower end of the market and upgraded their hotels stays. Investment in the luxury hotel market and strong airport passenger numbers in 2024 delivering an influx of international tourists and travellers helped to boost demand for luxury hotels.
“Budget hotels faced the greatest challenges, as they rely heavily on high occupancy to offset operating costs. But with demand dipping and room rates reaching a ceiling, this is hitting the bottom line. While travel has continued to be a priority for consumers post-pandemic, many opted for budget hotels during the height of the cost-of-living crisis as a way to cut costs but still getaway; we’re now starting to see a reversal in this trend.
“While the luxury market appears to be booming, the incoming squeeze on labour costs will acutely hit cashflow in 2025. Consumers demand a certain level of service at luxury hotels, which centres around their people, so reducing staff may not be an option. It’s therefore imperative that hoteliers take action now and look at ways of streaming processes and the adoption of technology, data analytics and AI to create efficiencies.”