Luxury hotels see highest rise in room rates as demand stays strong

The luxury hotel market was the “clear front runner” of UK hotel performance in the last few months of 2023, according to recent data.

The RSM Hotels Tracker, compiled and produced by Hotstats, revealed consumer demand for high-spend stays remained strong, with average room rates of UK luxury hotels jumping from £320.74 in November to £365.43 in December.

The London luxury market was particularly buoyant, with gross operating profits per available room (GOP PAR) up from £173.00 to £208.34 between November and December, while regional luxury hotels saw GOP PAR rise from £128.12 to £152.74 over the same period.

The latest figures follow the launch of the Peninsula in London’s Hyde Park Corner and Raffles London at the OWO (pictured) in Whitehall in September last year.

By contrast, the increase in room rates for middle market and budget hotels was less prominent, with figures rising modestly from £132.96 to £139.30 and £95.90 to £97.08.

Meanwhile, GOP PAR for UK middle market and budget hotels fell from £53.14 to £48.68 and from £34.21 to £29.78.

Occupancy for the UK hotel sector as a whole was higher than that of December 2022.

Luxury hotels saw a boost to 69% compared to 62% the previous year, while occupancy figures for middle market and budget exceeded pre-pandemic levels for the first time, with middle market recording 70%, up from 67%, and budget 72%, up from 69%.

Chris Tate, head of hotels and accommodation at RSM UK, said: “Overall it was a strong end to 2023 for the hotel industry, but it was quite a different story depending on the type of hotel. The luxury market emerged as the clear front runner, as strong demand over the Christmas period meant it could make hay while the sun shined. Despite more openings in the luxury market and therefore greater competition, it’s clear the demand is there and growing.

“Despite pockets of positivity, UK tourism is still not back to pre-pandemic levels, which is further compounded by the removal of tax-free shopping. But with the regime currently under review, hotels and various other UK businesses could be set for a significant boost.”

Last week, bosses at Heathrow Airport also backed calls for the reintroduction of VAT-free shopping for overseas visitors ahead of the Spring Budget.