Global Hotel Report: The state of the UK hospitality industry

This Global Hotel Network® Report takes a look at “The State of the UK Hospitality Industry” from the perspective of Bob Cotton (pictured), Chief Executive, British Hospitality Association. He explains:

UK hotels suffered from three negative events in 2001 – yet they emerged (except for London) at the end of the year in better shape than they thought possible in the summer. The worst casualty was the capital, where occupancy levels continued their decline into January 2002.

The first of the three events was the foot-and-mouth outbreak, which closed large areas of the countryside, thus inhibiting domestic holidays. Television pictures of burning pyres of cattle and huge disposal pits – beamed across the world – understandably gave the impression, both at home and overseas, that Britain was on fire and travel was impossible. Added to this was the impression, gained in America in particular, that foot and mouth was the cattle-degenerative disease BSE, with the resulting belief that beef was completely off the menu.

The second event was the gathering US recession. The all-important US visitor traffic – which comprises some 25 per cent of overseas visitor revenue and is vital to London even more than other parts of the UK – was beginning to soften during the year but this was made infinitely worse by the tragic events of September 11th. In the following three months, occupancies in London hotels fell by at least 20 per cent and, in many cases by much more.

Cost-cutting by major groups had already taken place as a result of the foot-and-mouth outbreak and the recession: some large hotels closed off floors; staff recruitment was abandoned; marketing plans were cut back; investment plans were postponed. The September 11 tragedy only hastened these measures as revenue and yields slumped.

Ironically, UK provincial hotels, particularly hit hard by the foot-and-mouth outbreak in the affected areas of Cumbria, Yorkshire, Devon, the South West, and parts of Wales and Scotland in the spring and summer of 2001, saw recovery in the fall. Although US visitors dropped alarmingly (by over 25 per cent) in the last quarter, far more British people decided to holiday at home as a result of the New York terrorist attack.

Although the foot-and-mouth outbreak is estimated to have cost the UK tourism industry over £3bn in lost domestic and overseas revenue, many country and provincial hotels reported strong domestic demand in the last quarter. In some cases, they had almost made up the revenue they had lost earlier in the year. Only hotels in the capital and in towns on the well known tourist route of Stratford, Bath, York and Edinburgh continued to suffer, with London experiencing the worst downturn since the early 1990s (but from a much higher base).

Latest figures from the hospitality consultancy PKF, shows occupancy in December in London down nearly 12 per cent compared with December 2000 and the average daily room rate per occupied room down by nearly 8 per cent. Occupancy in provincial hotels (PKF’s sample consists mainly of four star business hotels) was up slightly (by 0.7 per cent) with the average daily room rate per occupied room down by 2.2 per cent.

These London figures are bad but they are better than the October results (34 per cent drop in yield) and November (27 per cent drop). Hopefully, they show that the capital is beginning to claw back some of its losses.

Much here will depend on how determined the government is in supporting both the UK tourism industry and the British Tourist Authority in its marketing efforts. An additional £14.4m was granted to the BTA to help the UK recover from the impact of the foot and mouth outbreak. Recently, the BTA announced a £5m print campaign (drawn from that £14.4m) to promote Britain in eight countries, including the US and Canada. Criticism by the industry that this sum is far too little to make an impact on such a huge target audience, especially as it does not include television promotion, has not – as yet – yielded any additional funds. This compares to the $40m which New York is currently investing in its tourism promotion.

There are also structural problems facing the promotion of England which have yet to be resolved. Devolution in the UK brought in separate devolved tourist boards for Scotland (VisitScotland) and Wales (Wales Tourist Board) but tourism promotion for England was put in the hands of regional tourist boards which are responsible for promoting their particular region. The BTA remains responsible for promoting Britain overseas although Scotland and Wales are now considering overseas promotion themselves.

In England, however (which attracts 75 per cent of all overseas and domestic visitors) there is no national co-ordinating body to provide a promotional structure. The English Tourism Council is merely a research and administrative organisation without any marketing remit. At a time when a swift and coherent response to the challenges facing UK tourism is critical, this shortcoming needs to be addressed. Government recognises the force of the industry’s arguments but, so far, no additional funding has been made available and this unsatisfactory structure remains in place.

So the continuing success of UK tourism (and it is an undoubted success story with large investment projects continuing) lies – as ever – on government action, industry initiatives and outside events. For 2002, the Queen’s Golden Jubilee may be a positive attraction though, at present, there seems little evident government enthusiasm for this. The continuing recession in the US is holding back American visitors while no-one knows the impact of possible further terrorist outrages. International tourism depends on a peacefu