Labour remains key challenge for sector

There were other options available to hotels aside from cutting staffing levels when looking to costs, attendees of today’s webinar hosted by HOSPA and HotStats heard.

Paul Nisbett, CFO, Valor Hospitality Partners, said: “When you look quarter to quarter you have to remember there was a higher increase in National Living Wage in the last Budget. There is a quarter of this uplift still to come as a tail of the 2025 Budget; 2025 Q1 is affected by what was put in place in April 2024 and it was a higher NLW increase than this year.

“It’s easy to say ‘what do we do about payroll?’ but there’s only so far you can go. The way we addressed it was to immediately put a recruitment freeze on and to understand that we can’t recover it just through efficiencies, we went through the whole P&L. We went through all the options available to mitigate, focussed on the Ebitda.

“There’s brand and legal compliance for what you can and cannot do, but we had all our teams on it. The brands have understood and been flexible. F&B is an obvious one - do outlets need to be open every day? We need our A team to serve guests, but we can’t afford low occupancy periods in the restaurant. Retail F&B has been on that for a while, but hotels are catching up. Maybe having a bigger bar menu is better on those quiet days?

“I think the industry has grasped this and taken on the challenge. If you’re proactive and take your owners on the journey they may provide Capex to, for example, help cut energy costs. A lot of hotels have a lot of dead space behind the scenes and they should think about what they do with that space.”

The comments followed a presentation from Michael Grove, CEO, HotStats, on the current state of the hotel sector, which described as: “sombre in terms of performance, better for transactions”.

Across Europe, the UK was third from bottom for revenue and profits, with Grove commenting: “the real challenge for revenues is the size of the cost increases”.

Year-to-date labour costs were up 4.1%, with goppar 4.2% down. In the provinces, profitability was down 0.7 percentage points and in London GOP margins were down 0.3 percentage points for the rolling 12 months. Grove said: “London is still driving higher rooms profit and propping up F&B performance. Across the UK the real challenges are still in F&B and overall profitability has dropped back.”

There were signs of growth, with Grove describing July as strong month and August seeing half a percentage point growth in trevpar, “much more positive than Q1 and Q2”.

Within labour, Grove added: “If you split labour costs F&B was the least affected department, it was the most targeted area for cost savings. The big impact has been on spa, treatments and health club staffing and property and maintainance”.

Across the UK most markets had lost profitability and trevpar, but Grove drew attention to a handful who had seen growth, including Cardiff, which had benefited from hosting the opening dates of the Oasis tour.

Nisbett concluded: “The impact of big city-wide events like Oasis and Taylor Swift can really skew cities. These events have a massive play when they happen, which spills over into nearby cities.”