(Bloomberg) -- Central London hotels are bouncing back from the pandemic, with many already more profitable than they were before Covid-19 struck in 2020.
Higher prices are making up for more empty rooms, according to data compiled by hospitality analytics firm STR. The biggest recovery has been among budget chains such as Travelodge Hotels Ltd. and Premier Inn. That sector’s revpar, an industry metric of profitability, was 8.6% higher in April 2022 compared with February 2020.
Some of that demand is the result of surging inflation in the UK and elsewhere. While households are eager to go on holiday after the pandemic lockdowns, the squeeze on incomes means there’s more focus on costs. Britain is “becoming a nation of budget travelers,” Travelodge Chairman Martin Robinson said this month.
London’s hotel bounce-back has also been helped by the UK becoming the hottest destination among European travelers seeking a break as Covid-related restrictions are lifted.
Travelodge’s view is backed up by fellow economy hotel group EasyHotel Ltd., which says occupancy rates in central London are above pre-Covid levels. The chain, which is the sister company to airline EasyJet Plc, says the cost-of-living crisis is playing a part in peoples’ accommodation choices.
“Budgets are under pressure due to the cost inflation the country is seeing,” Chief Executive Karim Malak told Bloomberg. “Guests choose to stay at an EasyHotel to save money which they prefer to spend at local restaurants, attractions and events.”
The so-called upper upscale class, which includes brands such as Hilton Worldwide Holdings Inc., is also more profitable than it was pre-pandemic.
Meanwhile, the upscale class is about 6% off February 2020 levels, STR data show. The luxury sector, which includes names like the Ritz and the Dorchester, also isn’t seeing higher profitability, as occupancy hasn’t fully recovered. Still, average room rates are 22% above levels at the start of 2020.
One positive for the luxury sector is the influx of wealthy travelers from the Middle East and Africa seeking a break from the summer heat in their home countries. While that’s not been enough to lift occupancy to pre-Covid levels, soaring daily rates are helping to mitigate the dent to profitability.
“International arrivals are playing a large part in this growth story,” said Robert Stapleton, director of hotel capital markets at broker Savills Plc. “Continued strong domestic tourism and increased corporate spend are also fueling this growth.”
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