PPHE Hotel Group has raised its room rates but deliberately lowered occupancy in the UK to help it deliver the same level of service with less experienced staff.

Daniel Kos, chief financial officer and executive director at the hospitality real estate firm, told The Caterer staffing was “by far the largest challenge” to the company, especially at entry-level.

Although PPHE is “fully staffed” and “coping”, he said the amount of effort to retain and recruit team members was “significantly greater” than before the pandemic.

As a result, the company has increased salaries by more than 30% on average since 2019 to tackle the UK’s “structurally short” labour pool. Kos said room rates during the same period had roughly increased 25%.

PPHE’s portfolio includes 11 UK hotels under brands including Art’otel and Park Plaza that contribute £991m in value to its £2b portfolio.

Kos explained: “Right now, we are choosing to flex the occupancy a little bit lower and go for a bit of a higher rate. The reason for that is we feel we need to offer the supply and service we had before, and…we are still training our staff to get to those levels.”

He said occupancy in the year ended 31 December 2022 was at 60%.

Customer demand returns

Robert Henke, executive vice president commercial affairs at PPHE, said the group had seen a boost in its meeting and events custom, with some of its largest London venues “taking enquiries as far as 2024, 2025 and 2026”.

Corporate trade has also rebounded over the past nine months.

UK hoteliers including Sir Rocco Forte have warned the lack of VAT-free shopping in the UK is damaging tourist trade, but Kos and Henke said there was little “scientific proof” to suggest it was having an impact on leisure travel.

“I don’t think people travel to London to buy a purse,” Kos said.

The pair said London remained “super attractive” as a destination and reported their most recent opening, the capital’s first Art’otel at Battersea Power Station (pictured above), had gone “incredibly well”.

Future openings

PPHE is also on track to open Art’otel London Hoxton, a 27-storey mixed-use scheme that will offer 357 rooms, an art gallery, leisure facilities, destination restaurants and 5,900 sqm of office space, in early 2024.

Henke said the opening would “really put [PPHE] on the map in the London market”.

Despite the cost of living crisis, customers are not turning to budget hotels, according to Henke. “On the contrary, we’re seeing that lifestyle is one of the fastest growing segments still in hospitality,” he said.

PPHE also has two further London openings in development: a 465-bedroom hotel in Park Royal and a second site in Westminster, which is yet to receive planning permission