HOTSTATS 2011 - UK & EUROPEAN HOTEL INDUSTRY REPORT

FOREWORD 02 THE UK YEAR IN REVIEW 03 UK 04 LONDON 05 ENGLAND 06 SCOTLAND 07 WALES 08 FUTURE TRENDS 09 THE EUROPEAN CITY MARKET REVIEW 10 AMSTERDAM 11 BARCELONA 12 BERLIN 13 BUDAPEST 14 EDINBURGH 15 LEEDS 16 MADRID 17 MANCHESTER 18 PARIS 19 PRAGUE 20 ROME 21 WARSAW 22 COMPANY PROFILE 23 GLOSSARY 24

HotStats 2011 UK & Europe

FOREWORD 02 THE UK YEAR IN REVIEW 03 UNITED KINGDOM 04 / LONDON 05 ENGLAND 06 / SCOTLAND 07 / WALES 08 FUTURE TRENDS 09 THE EUROPEAN CITY MARKET REVIEW 10 AMSTERDAM 11 / BARCELONA 12 / BERLIN 13 BUDAPEST 14 / EDINBURGH 15 / LEEDS 16 MADRID 17 / MANCHESTER 18 / PARIS 19 PRAGUE 20 / ROME 21 / WARSAW 22 COMPANY PROFILE 23 GLOSSARY 24

For Further Information Mark Dickens, managing director mark.dickens@hotstats.com David Stephens, senior operations analyst david.stephens@hotstats.com Tony Oliveira, commercial analyst tony.oliveira@hotstats.com HotStats Limited 5th Floor, 88 Baker Street London W1U 6TQ Tel +44 (0)20 7892 2222 Fax +44 (0)20 7486 1189 Visit www.hotstats.com

HotStats 2011 may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent.
HotStats 2011: UK & European Hotel Industry

FOREWORD Welcome to HotStats 2011 UK & European Hotel Industry Report. HotStats has developed further in the UK and Europe over the past year to enable continued reporting on the performance of the hotel market. This publication is focused on the United Kingdom in its entirety and is complemented by coverage on the breakdown of reviews of the London, England, Scotland and Wales hotel markets for 2010. We also present our forecast for 2011 for London and the Provinces. In the following pages you will find analysis of selected key European hotel markets including Amsterdam, Barcelona, Berlin, Budapest, Madrid, Paris, Prague, Rome and Warsaw. In a regional look at the UK city performance, we have focussed on Edinburgh, Leeds and Manchester. Our city samples include only four and five-star city centre hotels. In an ever-changing industry we are able to report on an increasing number of hotel markets and destinations, providing valuable information, comment and analysis in the form of this annual HotStats publication, as well as our other reports and analyses. We would like to thank all the contributors to HotStats without whom this publication would not be possible.

Mark Dickens Managing Director HotStats

HotStats 2011: UK & European Hotel Industry

The UK Year in Review: Introduction

In this edition of HotStats 2011, we present the results of a sample of hotels throughout the United Kingdom reflecting our current database. This year the UK sample comprises 547 fullservice branded hotels. We present in the following sections a detailed analysis of the results categorized by region. The UK section provides analysis of results for London, England (excluding London), Scotland and Wales using information exclusive to HotStats. More detailed information is available on many individual cities throughout the UK, as well as London Airports. Please turn to page 23 for more information. We summarize the key data in the table below.

Key Characteristics of the HotStats 2011 UK Hotel Samples

Average Number of Rooms TOTAL UK LONDON ENGLAND SCOTLAND WALES 182 287 151 150 146 Occupancy % 73.6 82.1 67.9 73.4 69.2 Average Daily Room Rate 90.54 123.32 66.75 74.34 67.78 RevPAR 66.68 101.2 45.32 54.53 46.9

HotStats 2011 is compiled on the basis of financial years ended during 2010. For comparative purposes the statistics for 2009 are also included where appropriate. We are most grateful to all those who have contributed for the first time this year and are equally grateful to those hotel operators who contribute on a regular basis and provide the continuity that is essential to a study of this nature. Please note, however, that results can be influenced by sample fluctuations as hotels exit the sample and new properties are added. The information in this study relates to the results of a sample of 547 full-service hotels. The amounts and percentages should not be considered as a standard for any type of property or for any country or region, but only as guidelines for comparison with the operating results of a specific property. They are not an attempt by HotStats to set or confirm prices or operating standards for the hotel industry. The terminology used and the account titles are based on the Uniform System of Accounts for the Lodging Industry (see glossary on page 24).

HotStats 2011: UK & European Hotel Industry

The UK Year in Review: United Kingdom

2010 proved to be another challenging year for the UK economy. VAT returned to 17.5 per cent, inflation climbed to 3.7 per cent its highest point in roughly 18 months, oil and energy prices increased, all amidst the inauguration of a new coalition government. Despite the ever fluctuating economic and political activity, the UK economy emerged from the recession during 2010 with GDP growth of 1.3 per cent compared to -4.9 per cent during the previous year. This resulted in a recovery in hotel market conditions for the first time since the economic downturn began in September 2008. The continuing strength of Londons hotel market is the most significant factor influencing the overall UK performance UK Full-Service Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 73.6 90.54 66.68 33.72 108.78 42.23 28.3 38.8 2009 72.1 87.09 62.78 34.05 105.30 39.72 28.6 37.7 % Variance 1.5 pts 4.0% 6.2% -1.0% 3.3% 6.3% 0.3 pts 1.1 pts

Departmental Revenue Contribution 2010

Other Depts. 9.2% Beverage 8.5% Food 18.1% Rooms 61.3% Rentals & Other 3.0%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total 1.9% 2.5% 3.2% 3.7% 5.3% 5.1% 1.4% 9.8% 28.3% 38.8% 100.0%

Rooms occupancy and average room rate increased during 2010 resulting in a considerable rise of 6.2 per cent in rooms RevPAR. Staycations continued to be a significant driver of demand during the summer holiday period as UK based tourists continued to swap their overseas holidays for the UK regions. The number of overseas visits made by UK residents were down 6 per cent compared to 2009 as a result. UK tourisms downward trend continued during 2010 with 29.6 million overseas residents visiting the UK. The bad weather which swept the UK caused a sharp fall in the number of overseas visitors to the UK as heavy snow and ice caused severe travel disruptions. The UK hotel market was significantly affected by the bad weather due to a large number of cancellations and severely reduced access. There is still a feeling of uncertainty surrounding the UK economy and the operating environment of the hotel market with a number of potential hotel developments and transactions still being postponed due to lack of funding. However, most hoteliers are feeling slightly more optimistic about what lies ahead as operating figures show signs of recovery having bottomed out during 2009. Payroll costs decreased at 28.3 per cent. Energy prices fell from 4.5 per cent as percentage of total revenue as hoteliers seek ways to run a more efficient operation, finishing at 3.7 per cent. Profit conversion rates for UK hotels increased marginally with Gross Operating Profit (GOP) rising by 1.1 percentage points to 38.8 per cent as a percentage of total revenue.

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 74.0% 35.3% 22.3% 68.2% 60.4% 4

HotStats 2011: UK & European Hotel Industry

The UK Year in Review: London

The London hotel market has continued to exceed expectations in recent years, with the recession having a lesser effect on hotel market conditions than expected. The corporate, conference and leisure destination city has highlighted its resilience by reporting a considerable recovery in overall operating performance during 2010 as the UK economy edged out of recession. International events continue to attract demand to the city including the Wimbledon Championships and the biennial Farnborough Air Show. London hoteliers will be confident of building upon the recovery in performance during 2010, particularly with the London Olympics in 2012 on the horizon. London Full-Service Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 82.1 123.32 101.20 33.81 141.22 67.47 24.3 47.8 2009 80.1 113.23 90.72 32.89 129.69 59.29 25.2 45.7 % Variance 2.0 pts 8.9% 11.5% 2.8% 8.9% 13.8% 0.9 pts 2.1 pts

Departmental Revenue Contribution 2010

Other Depts. 5.6% Rentals & Other 3.0%

Beverage 6.3%

Food 13.5% Rooms 71.7%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total 1.3% 2.1% 3.3% 2.6% 4.7% 3.6% 1.0% 9.4% 24.3% 47.8% 100.0%

Rooms occupancy and average room rate both increased in 2010 by two percentage points and 8.9 per cent respectively. The increase in occupancy to 82.1 per cent and the recovery in average room rate to 123.32 led to a room RevPAR performance of 101.20, an increase of 11.5 per cent. Despite the increase in demand for London hotels, passenger traffic at all Londons airports fell. London Heathrow witnessed a 0.2 per cent decrease in passenger numbers with London Gatwick seeing passenger numbers fall by 3.1 per cent compared to 2009. The decrease in passenger numbers is largely due to increased fuel costs and severe weather conditions during November and December of 2010. Visitors have been using alternative methods of transport due to the increase in fuel prices, and the flight disruptions caused by the ash cloud. This was evidenced by the three per cent year-on-year increase in Eurostar passenger numbers during 2010. Additionally, exchange rates resulted in London becoming a more attractive and affordable city to visit. Hotel development is ever-present in London, with 2010 being no exception. A selection of the most high-profile hotel openings throughout the year include the 1,021-bedroom Park Plaza Westminster and the hugely anticipated re-opening of the refurbished Savoy Hotel. High profile opening in 2011 include the W Hotel, Corinthia Hotel and Renaissance St Pancras hotels. The departmental revenue breakdown highlights that rooms revenue accounts for the largest proportion of total revenue at 71.7 per cent and food and beverage revenues contribute 19.8 per cent. As a result of the improved rooms occupancy and average room rate, GOPPAR performance increased considerably by 13.8 per cent to 67.47 whilst Gross Operating Profit (GOP) as a percentage of total revenue stood at 47.8 per cent, an 2.1 percentage points increase on the previous year.
HotStats 2011: UK & European Hotel Industry

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 77.6% 34.4% 8.1% 73.2% 66.4% 5

The UK Year in Review: England

The England (excluding London) hotel market continued its slow recovery during 2010, with rooms occupancy increasing to approximately 68 per cent, from 66.1 per cent achieved during 2009. In 2010, GDP rose by 1.3 per cent year-on-year, up from negative growth of 4.9 per cent in 2009. Given the strong correlation between economic growth and the performance of the English provincial hotel sector, any further recovery is dependent on the underlying performance of the UK economy. Despite an increase in room sales, a decline in total revenues led to a decrease of 0.2 percentage points in the profitability of chain hotels in England. England Full-Service Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 67.9 66.75 45.32 33.57 88.60 27.03 32.0 30.5 2009 66.1 67.60 44.69 34.36 88.93 27.27 31.5 30.7 % Variance 1.8 pts -1.3% 1.4% -2.3% -0.4% -0.9% (0.5) pts -0.2 pts

Departmental Revenue Contribution 2010

Other Depts. 13.0% Beverage 10.4% Food, 22.4% Rentals & Other 3.0%

Rooms 51.2%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 2.5% 3.0% 3.2% 4.7% 5.9% 6.4% 1.7% 10.0% 32.0% 30.5% 100.0%

Overall occupancy within the England hotel sample remains 5.7 percentage points below the UK as a whole. Given the harsh weather conditions at the beginning and end of 2010, as well as challenging trading conditions in between, Provincial England hotels have performed reasonably well, achieving a 1.8 percentage points increase in annual rooms occupancy levels at 67.9 per cent. Average room rate declined by 1.3 per cent to 66.75. As a result, RevPAR increased by 1.4 per cent on the previous year to 45.32. Official figures highlight a significant tourism decline in 2010, with annual trip volumes declining by six per cent, and bednights and average spend reducing by eight and six per cent respectively on the previous year. Given the decline in demand, it is highly commendable that provincial hoteliers performed as strongly as they did in what continues to be a highly challenging market. Cities such as Birmingham, Leeds and Manchester experienced an increase in volume demand, although remain extremely rate sensitive, constraining any growth in average room rate. Markets, with limited hotel supply and relatively popular leisure profiles such as Bath, Cambridge and Oxford experienced a growth in both annual room occupancy levels and average room rate. In overall terms, profit conversion rates in our England hotel sample experienced a marginal decline in Gross Operating Profit (GOP) by 0.2 percentage points to 30.5 per cent as a percentage of total revenue.

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 69.1% 36.9% 28.0% 64.7% 54.9% 6

HotStats 2011: UK & European Hotel Industry

The UK Year in Review: Scotland

Scotland emerged from recession during the last three months of 2009 registering a 0.4 per cent growth benefiting from an open, mixed economy with strong international ties. Traditionally dominated by heavy industry, including ship building and steel, the Scottish economy now consists of an international petroleum industry and has a considerable financial services sector with many of Europes largest finance firms having a base in the country. Departmental Revenue Contribution 2010
Other Depts 8.8% Beverage 10.3%
% Variance 0.2 pts 0.2% 0.3% -5.4% -2.3% -3.2% (0.3) pts -0.3 pts

Rentals & Other 3.3%

Scotland Full-Service Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 73.4 74.34 54.53 33.32 95.88 31.48 31.0 32.8 2009 73.2 74.21 54.35 35.22 98.11 32.51 30.7 33.1

Food 20.8%

Rooms 56.9%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total 2.5% 2.5% 3.0% 4.3% 6.1% 6.1% 1.6% 10.0% 31.0% 32.8% 100.0%

Scottish hoteliers endured a challenging year during 2010 with stability being the key focus. HotStats benchmark figures for fullservice hotels indicate that rooms occupancy remained relatively constantly, increasing marginally by 0.1 percentage points to 73.4 per cent. Combined with a 0.2 per cent increase in average room rate, rooms RevPAR increased by 0.3 per cent to 54.53. Scotland benefits from a buoyant leisure tourism industry, particularly throughout the summer months. Branded hotel supply is predominantly concentrated within the countrys major cities of Edinburgh, Glasgow and Aberdeen. Staycations have helped to boost the leisure demand for hotels in the country with hoteliers noticing an increase in the number of visits from UK residents. Consistent with the rest of the UK, hoteliers reported difficult trading conditions during November and December with heavy snowfall causing chaos to the countrys travel and tourism industry. Planning consent has been granted for a considerable number of new hotel developments in Scotland, particularly within the major cities. However, with the recent economic downturn, funding has been difficult to obtain and not all development propositions will come to fruition. However, there remain a number of potential opportunities for further expansion of the hotel sector within Scotland. At an operational level, the marginal increase in rooms RevPAR was insufficient to prevent further decreases in profitability during 2010. GOPPAR decreased 3.2 per cent year-on-year to 31.48. Payroll as a percentage of total revenue increased from 30.7 per cent in 2009 to 31.0 per cent in 2010. On the other hand, food and beverage expenses have decreased from a combined 8.8 per cent to 8.6 per cent, as have energy costs from 4.8 per cent in 2009 to 4.3 per cent in 2010.
HotStats 2011: UK & European Hotel Industry

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 71.2% 32.0% 23.1% 61.2% 55.6% 7

The UK Year in Review: Wales

Our review largely reflects the performance of branded hotel supply in the Welsh hotel market, which is mostly concentrated in the cities of Cardiff, Swansea and Newport. In the period between 2008 and 2010, Wales experienced a decline in demand levels, primarily driven by the effects of the economic downturn and significant increase in bedstock. In Cardiff alone, during the past ten years, the hotel market has increased by approximately 1,900 additional bedrooms, the majority of which were branded. Wales recent staging of the 2010 Ryder Cup and its role in the 2012 London Olympics is likely to assist the recovery of the Welsh hotel market. Wales Full-Service Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 69.2 67.78 46.90 37.46 98.89 26.73 33.6 27.0 2009 69.9 67.75 47.34 41.14 103.97 29.22 32.9 28.1 % Variance -0.7 pts 0.0% -0.9% -8.9% -4.9% -8.5% (0.7) pts -1.1 pts

Departmental Revenue Contribution 2010

Other Depts. 15.8% Rentals & Other 2.4%

Beverage 11.5% Food 22.8%

Rooms 47.4%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 2.9% 2.9% 3.2% 5.5% 5.6% 7.0% 2.0% 10.3% 33.6% 27.0% 100.0%

Overall occupancy within the Welsh hotel sample remains approximately four percentage points below the UK as a whole, due to the continuing challenging trading conditions and an overall decline in visitors to Wales. As a result, annual rooms occupancy levels in Wales showed a marginal decline of 0.7 percentage points at 69.2 per cent, whilst average room rate remained stable, resulting in a decline in RevPAR of 0.9 per cent to 46.90. Wales staged the 2010 Ryder Cup at Celtic Manor, which attracted more than 50,000 visitors and reportedly contributed approximately 82.4 million to the Welsh economy. Furthermore, the 2010 Ryder Cup had a positive impact on revenues for golf tourism, which increased by 21 per cent during 2010. During the last ten years, Wales has benefited from national and international recognition through a combination of major new investments, such as Cardiff Bay, and the staging of a series of major domestic and international sports events at the Millennium Stadium, such as the Rugby World Cup, Six Nations Rugby, Heineken Cup Final, Carling Cup Final and the FA Cup Final. Due to challenging market conditions and a decline in visitor numbers to Wales, overall profit conversion for Welsh hotels declined by 1.1 percentage points to 27.0 per cent as a percentage of total revenues, which is relatively low compared to the wider UK average. The decrease in GOP is largely attributable to a decline in TrevPAR and higher than average food and beverage, payroll and energy costs.
HotStats 2011: UK & European Hotel Industry

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 68.4% 31.0% 41.8% 55.1% 52.1% 8

Future Trends 2011 London Hotel Performance Forecasts

Year 2009 2010 2011 F Occupancy 1.9 pts 0.3 pts Forecast Growth ARR 8.9% 3.0% RevPAR 11.5% 3.4% Occupancy 80.1% 82.1% 82.4% Performance ARR 113.23 123.32 127.02 RevPAR 90.72 101.20 104.64

In 2010, London hoteliers increased occupancy and average room rate performance, supported by a pick-up in corporate demand and events such as the biennial Farnborough Festival. In the first quarter of 2011, occupancy performance has dipped, with London hoteliers pursuing a rate growth strategy to commercial and leisure markets, further enhancing London market average RevPAR performance.

Going forward, we forecast the London full-service hotel market will continue to increase rate to the leisure and commercial markets, projecting average room rate growth of 3.4 per cent, whilst the occupancy will remain relatively stable given 2010s robust performance, with room for marginal growth in occupancy of 0.3 percentage points. Whilst London will not benefit in 2011 from the monthly spikes generated through large events such as Farnborough, and the timing of Ramadan in August this year is expected to affect Summer demand from the Middle East, latest figures from Visit Britain indicate that leisure demand is forecast to remain robust as the strong growth in overseas visits from BRIC, North America, and recovering European economic countries will sustain robust visitor levels to the capital. The continuing decline in the strength of sterling versus the euro will boost European inbound but a weak dollar will temper US tourism to London although in quarter 1, US inbound increased by 5%. The continuing trend of an increase in commercial demand as a proportion of total market mix and increased rate growth to all sectors result in our forecast of further average room rate growth of 3% in 2011, resulting in overall RevPAR growth of 3.4 per cent.

Provinces Hotel Performance Forecasts

Year 2009 2010 2011 F Occupancy 1.5 pts 0.0 pts Forecast Growth ARR -0.9% 1.0% RevPAR 1.3% 0.9% Occupancy 67.3% 68.8% 68.8% Performance ARR 68.71 68.07 68.75 RevPAR 46.26 46.84 47.26

We forecast that the UK provincial full-service hotel market occupancy will remain flat in 2011. Whilst ongoing economic recovery should help to revive the fortunes of the commercial sector, public sector job losses and consumer uncertainty are likely to dampen the leisure sector prospects, particularly during the key holiday/leisure months of April, July, August and December.

Such conditions will result in full-service hotels competing harder for the leisure market as the increase in VAT mounts further pressure on this segment. In addition, increasing competition from the budget hotel sector is likely to force full-service hotels to further reduce leisure tariffs in order to protect volume. Given the above, we forecast that the provincial market will experience a shift in sector mix, with an increase in corporate sector demand compensating for a forecasted decrease in the value of leisure demand. As a consequence, we forecast an ARR increase of 1.0% resulting in a 0.9% increase in RevPAR.

HotStats 2011: UK & European Hotel Industry

European City Market Introduction

In this edition of HotStats 2011, we present the results of a sample of hotels throughout a selection of European destinations reflecting our current database; this year, 12 European locations are analyzed with samples comprising only 4 and 5-star city centre hotels. The European city market section of this report provides analysis of performance for Amsterdam, Barcelona, Berlin, Budapest, Edinburgh, Leeds, Madrid, Manchester, Paris, Prague, Rome and Warsaw using information exclusive to HotStats. More detailed information is available on many individual cities throughout Europe. Please turn to page 23 for more information. We summarize the key data in the table below.

Key Characteristics of the HotStats 2011 4/5 Star European City Centre Hotel Samples
Average Number of Rooms AMSTERDAM BARCELONA BERLIN BUDAPEST EDINBURGH LEEDS MADRID MANCHESTER PARIS PRAGUE ROME WARSAW 273 290 397 286 192 193 209 237 256 323 276 352 Occupancy 75.8% 65.6% 71.1% 64.1% 75.2% 70.5% 66.3% 69.8% 76.1% 65.5% 70.1% 71.5% Average Daily Room Rate 165.10 119.27 126.98 89.01 85.70 66.29 119.33 78.20 199.62 86.11 184.02 89.79 RevPAR 125.81 78.28 90.25 57.03 64.44 46.72 79.14 54.57 151.81 56.42 129.00 64.23

HotStats 2011 is compiled on the basis of financial years ended during 2010. For comparative purposes the statistics for 2009 are also included where appropriate. We are most grateful to all those who have contributed for the first time this year and are equally grateful to those hotel operators who contribute on a regular basis and provide the continuity that is essential to a study of this nature. Please note, however, that results can be influenced by sample fluctuations as hotels exit the sample and new properties are added. The information in this study relates to the results of a sample of 152 city centre full-service hotels. The amounts and percentages should not be considered as a standard for any type of property or for any country or region, but only as guidelines for comparison with the operating results of a specific property. They are not an attempt by HotStats to set or confirm prices or operating standards for the hotel industry. The terminology used and the account titles are based on the Uniform System of Accounts for the Lodging Industry (see glossary on page 24).

HotStats 2011: UK & European Hotel Industry

10

European City Market: Amsterdam

Following the recent economic downturn, the Amsterdam hotel market has experienced a significant increase in visitor numbers during 2010 generating approximately 9.7 million hotel roomnights, an increase of 1.2 million hotel roomnights versus 2009, as well as an increase on 2007 when the hotel market reached its high watermark. The strong tourism growth in 2010 was partly driven by SAIL Amsterdam in August, a quinquennial maritime event which attracts approximately 1.5 million visitors. Whilst Amsterdams economy is showing signs of recovery, the underlying national economy lags behind. Departmental Revenue Contribution 2010
Other Depts. 4.2% Beverage 5.2% Food 16.2% Rentals & Other 3.7%

Amsterdam 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 75.8 165.91 125.81 43.33 178.15 68.58 31.5 38.5 2009 69.2 153.67 106.30 39.75 155.42 50.73 33.7 32.6 % Variance 6.6 pts 8.0% 18.3% 9.0% 14.6% 35.2% 2.2 pts 5.9 pts

Rooms 70.6%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 1.0% 2.3% 3.6% 2.4% 4.1% 4.3% 1.7% 10.7% 31.5% 38.5% 100.0%

As a result of a significant increase in visitors to Amsterdam in 2010, rooms occupancy increased to 75.8 per cent, in addition to an eight per cent increase in average room rate to 165.91, driving an increase in rooms RevPAR of 18.3 per cent. Notwithstanding a significant increase in hotel bedroom supply, occupancy levels still increased by 6.6 percentage points in 2010. The growth in number of rooms sold during 2010 is attributable to a significant increase in domestic visitors as well as visitors from key European countries such as France, Germany, Italy, Spain and the UK as well as the USA. That said, demand from two key markets, which have been particularly affected by the economic downturn (ie USA and UK), have not recovered to levels previously achieved in 2007. The Amsterdam hotel market continues to develop with the opening and re-opening of several hotels during 2011. New openings include the 553-bedroom Mint Hotel Amsterdam close to the Amsterdam Central Station on the Oosterdokseiland as well as a 44-bedroom All Seasons Hotel and the 125-bedroom Eden Amsterdam Manor Hotel. Profit conversion rates for Amsterdam hotels are extremely strong compared to other European city markets with GOPPAR increasing by 35.2 per cent to 68.58, fuelled by payroll and cost efficiencies. Gross Operating Profit (GOP) increased by 5.9 percentage points to 38.5 per cent as a percentage of total revenue during 2010.

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 71.5% 22.8% 10.3% 63.7% 58.8% 11

HotStats 2011: UK & European Hotel Industry

European City Market: Barcelona

Spain has struggled to cope with the effects of the global economic downturn and currently faces the highest unemployment rate in the eurozone at around 20 per cent. Currently, Spains tourism industry accounts for approximately 11 per cent of the countrys GDP, in which Barcelona continues to play a pivotal role, due to its strong leisure profile. In 2010, Barcelona benefited from 7.1 million visitors generating 14 million roomnights, achieving one of the highest year-on-year increases in demand of all large European cities. Departmental Revenue Contribution 2010
Other Depts. 4.6% Beverage 5.3% Food 15.1% Rooms 71.9% Rentals & Other 3.2%

Barcelona 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 65.6 119.27 78.28 26.42 108.86 34.42 34.9 31.6 2009 61.7 119.14 73.52 23.78 101.24 30.40 35.8 30.0 % Variance 3.9 pts 0.1% 6.5% 11.1% 7.5% 13.2% 0.9 pts 1.6 pts

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 0.8% 2.7% 2.3% 3.9% 6.6% 4.4% 0.5% 12.4% 34.9% 31.6% 100.0%

Barcelonas hotel market performance remains relatively depressed due to the significant numbers of available rooms; nevertheless, an increase in visitor numbers resulted in an increase in annual rooms occupancy levels of 3.9 percentage points during 2010, to 65.6 per cent, but at the expense of average room rate, which remained relatively static. As a result, hotels managed to increase their RevPAR by 6.5 per cent to 78.28. Meeting and congresses also remain an important source of income for Barcelona; however, after losing the "Bread and Butter" fashion fair to Berlin, it is also in danger of losing the annual World Mobile Congress beyond 2012, an event with an annual attendance exceeding 50,000 delegates, due in part, to the significant increase in room rates during these high-profile events and lack of accessibility from Barcelonas airport. Barcelona currently offers 328 hotels comprising approximately 32,000 bedrooms, the majority of which comprises four-star hotels (approximately 51 per cent of available bedrooms). Between 2009 and 2010, Barcelona has seen 16 additional hotel openings, notably, the 473-bedroom W Barcelona and the 98-bedroom Mandarin Oriental hotels. An increase in demand levels during 2010, resulted in an increase in room yield and food and beverage RevPAR. As a result, TrevPAR increased by 7.5 per cent to 108.86. Sales and Marketing expenses of 2.3 per cent of total revenue are amongst the lowest in Europe. Gross Operating Profit (GOP) increased by 1.6 percentage points to 31.6 per cent as a percentage of total revenue.
HotStats 2011: UK & European Hotel Industry

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 66.3% 22.5% 5.2% 60.6% 55.3% 12

European City Market: Berlin

Germanys capital city has a population of approximately 3.4 million supported by the countrys strong economy. Berlin has consistently outperformed the rest of the country over recent years, a trend which continued during 2010 despite the robust performance of the German economy, which grew by 3.5 per cent. Berlins economy is dominated by the service sector with approximately 80 per cent of all companies operating in this sector. A multitude of German and international companies have established primary and secondary departments or offices in the city, including Siemens and Deutsche Bahn, the state-owned transportation company. Berlin 4/5 Star Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 71.1 126.98 90.25 50.61 148.06 51.20 29.4 34.6 2009 69.4 116.40 80.79 49.67 137.65 45.77 30.2 33.3 % Variance 1.7 pts 9.1% 11.7% 1.9% 7.6% 11.9% 0.8 pts 1.3 pts

Departmental Revenue Contribution 2010

Other Depts. 7.2% Beverage 8.6% Food 19.0%

Rentals & Other 4.2%

Rooms 61.0%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total 1.4% 2.5% 3.0% 4.4% 4.4% 5.5% 2.5% 12.3% 29.4% 34.6% 100.0%

Stronger than expected economic growth in the German capital has resulted in strong hotel market performance with increases in all KPIs. Rooms occupancy increased to 71.1 per cent during 2010, with rooms RevPAR increasing significantly by 11.7 per cent to 90.25, primarily due to a considerable increase in average room rate to 126.98, up 9.1 per cent. Berlins leisure and business tourism industries deliver demand for all hotels in the city. At the end of 2010, Berlin had a total of approximately 750 hotels, totalling approximately 112,000 beds. The citys hotels reported a total of 20.8 million overnight stays and approximately nine million hotel guests throughout the year. With an additional 135 million day visitors, Berlin was the third most visited city in the European Union. The city hosts several annual, large-scale exhibitions and trade fairs attracting significant hotel demand from corporate travellers. Berlin is a popular city for future hotel developments with approximately 20 hotel developments in the pipeline, adding approximately 5,000 new bedrooms to the hotel market during 2010 and 2011. New hotels which opened in the city during 2010 include the 4-star Soho House and Scandic hotels with 40 and 565 bedrooms respectively as well as the 81-bedroom, 5-star Das Stue hotel. With regard to operational performance, Berlin hotels enjoyed an 11.9 per cent increase in GOPPAR to 51.20 with an increase in overall Gross Operating Profit (GOP) as a percentage of total revenue of 1.3 percentage points to 34.6 per cent. Berlin fullservice hotels have become more efficient in recent years with payroll costs reducing to 29.4 per cent as a percentage of total revenue. Additionally, food and beverage costs have reduced as a result of falling F&B revenue contribution; however, rooms revenue contribution has increased to 61.0 per cent of total revenue.
HotStats 2011: UK & European Hotel Industry

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 71.4% 26.4% 0.8% 68.5% 55.5% 13

European City Market: Budapest

The Hungarian capital continued to face challenging economic and hotel market conditions during 2010. The economic downturn during 2008 subsequently led to a severe recession in the country, where GDP growth fell by 6.4 per cent, one of the worst economic contractions in the countrys history. Year-end GDP growth for 2010 reached 1.2 per cent as the country emerged from recession. Budapest has a diverse economy where industrial production is concentrated on the outskirts of the city. The capital is one of Europes top destination cities and attracts a considerable number of both leisure and corporate visitors. Budapest hoteliers have experienced an extremely challenging operating environment over recent years. Berlin 4/5 Star Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 64.1 89.01 57.03 26.46 91.06 25.14 31.1 27.6 2009 58.8 94.61 55.65 24.27 88.00 24.38 30.6 27.7 % Variance 5.3 pts -5.9% 2.5% 9.0% 3.5% 3.1% (0.5) pts -0.1 pts

Departmental Revenue Contribution 2010

Other Depts. 4.5% Beverage 7.1% Food 18.5% Rentals & Other 7.3%

Rooms 62.6%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 1.3% 3.3% 3.9% 7.3% 6.4% 5.5% 1.2% 12.3% 31.1% 27.6% 100.0%

Budapest saw an increase in demand for hotels as rooms occupancy increased by 5.3 percentage points to 64.1 per cent during 2010. Despite the considerable demand increase, average room rate reduced from 94.61 in 2009 to 89.01 in 2010 due to the increased price sensitivity of demand. Rooms RevPAR stood at 57.03 for 2010, an increase of 2.5 per cent. Budapest is the key generator of tourism in Hungary. The capital is home to thousands of restaurants and bars and is the most visited region in the country. During 2010 Budapest Airport handled approximately 8.2 million passengers, which is an increase of 1.2 per cent compared to 2009. According to the International Congress and Convention Association (ICCA) Budapest is ranked in the top 20 cities in the world for conference and conventions. Prior to the recession in Hungary, various hotel developments totalling approximately 1,000 bedrooms were set to enter the Budapest hotel market, the majority of which have since been put on hold. Payroll costs as a percentage of revenue also increased to 31.1 per cent with food and beverage RevPAR increasing by nine per cent and an increase in TrevPAR of 3.5 per cent to 91.06. Energy costs have increased in recent years to 7.3 per cent of total revenue. The profitability of hotels in Budapest has yet to recover with Gross Operating Profits (GOP) as a percentage of total revenue decreasing marginally by 0.1 percentage points to 27.6 per cent during 2010.

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 76.1% 29.9% 6.6% 68.5% 61.6% 14

HotStats 2011: UK & European Hotel Industry

European City Market: Edinburgh

Despite the recession during 2009, the Scottish Capital continues to attract a large number of both leisure and corporate visitors. The Edinburgh economy is largely based on services, particularly financial, with banks including Lloyds, HBOS and RBS locating their head offices in the city. As a result, Edinburgh is the second largest financial centre in the UK after London and a major financial hub within Europe. In world terms, it ranks ahead of Amsterdam, Brussels and Kuala Lumpur in the Global Financial Centres Index. Edinburgh hosts a number of popular events each year including the Edinburgh Festival Fringe, as well as the Edinburgh International Festival, the Edinburgh Military Tattoo and the Edinburgh International Film Festival. Edinburgh 4/5 Star Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 75.2 85.70 64.44 28.71 101.15 34.46 30.9 34.1 2009 76.2 83.37 63.50 30.10 102.38 36.23 30.0 35.4 % Variance -1.0 pts 2.8% 1.5% -4.6% -1.2% -4.9% (0.9) pts -1.3 pts

Departmental Revenue Contribution 2010

Other Depts. 7.0% Beverage 7.6% Food 17.4% Rentals & Other 4.4%

Rooms 63.7%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 1.8% 2.2% 3.3% 3.6% 6.2% 5.0% 1.6% 11.2% 30.9% 34.1% 100.0%

The emergence from the recession of 2009 saw hotel performance remain relatively stable during 2010. Rooms RevPAR increased by 1.5 per cent to 64.44, for four and five-star hotels in the city, due to the increase in average room rate of 2.8 per cent to 85.70 despite a marginal decrease in rooms occupancy of one percentage point to 75.2 per cent. Edinburgh attracts approximately 3.5 million visitors per year, making it the second most visited tourist destination in the UK, after London. This is, in part, due to the number of festivals hosted in the city during the summer months, doubling the resident population. Major redevelopment has taken place at Edinburgh Airport and will continue to do so with passenger numbers expected to increase to 26 million passengers by 2030. The city is constantly undergoing considerable regeneration to increase its appeal as a leisure and corporate destination. The hotel development pipeline for Edinburgh is extensive with major operators and investors continuing to search for development opportunities. The market is highly resilient in that additional bedroom supply to the hotel market is absorbed with negligible effects on the overall market performance. Food and beverage accounts for a relatively large proportion of total revenue at 25.0 per cent, with rooms revenue making up 63.7 per cent of total revenue. The improved rooms RevPAR performance during 2010 has unfortunately not increased overall profitability of four and five-star hotels in Edinburgh. Gross Operating Profit (GOP) conversion decreased from 35.4 per cent to 34.1 per cent and payroll increased as a percentage of total revenue to 30.9 per cent.
HotStats 2011: UK & European Hotel Industry `

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 71.5% 26.7% 19.0% 50.5% 56.7% 15

European City Market: Leeds

The UK provincial cities have continued to struggle as hotel market conditions create a difficult trading environment. Corporate accommodation rates in cities such as Leeds have reduced, impacting the overall profitability of hotels. Leeds is an important centre within the UK and relies heavily on corporate and conference demand as one of the largest financial centres in the UK outside London. Leeds was the only major UK city, along with Bristol, to have an employment rate at or above the national average. Departmental Revenue Contribution 2010
Other Depts. 12.6% Beverage 11.3%
% Variance 0.8 pts -4.1% -3.1% -7.9% -5.8% -10.4% (1.0) pts -1.4 pts

Rentals & Other 3.5%

Leeds 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 70.5 66.29 46.72 36.25 92.03 25.78 32.2 28.0 2009 69.7 69.15 48.22 39.37 97.69 28.77 31.2 29.4

Food 21.9%

Rooms 50.8%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 2.9% 3.0% 3.2% 5.1% 5.7% 6.3% 1.6% 11.9% 32.2% 28.0% 100.0%

Corporate accommodation budget cuts during 2010 in large part accounted for the 4.1 per cent decrease in average room rate to 66.29. Conversely, occupancy increased marginally by 0.8 percentage points to 70.5 per cent which may have been the result of increased leisure demand thanks largely to the extensive marketing campaigns of Welcome to Yorkshire. However, this could not prevent a further decrease in rooms RevPAR compared to 2009 figures to 46.72, down 3.1 per cent. As one of the fastest growing cities in the UK with a population of approximately 770,000, Leeds generates a fifth of the regions tourism economy. However, provisional figures state that visits to the city decreased during 2010 with over 210,000 staying visits made by inbound visitors compared to approximately 230,00 during 2009. That said, passenger numbers at Leeds Bradford International Airport increased by seven per cent to approximately 2.8 million compared to 2009, after the recession and reduction in global travel had impacted passenger numbers. Food and beverage RevPAR posted the largest year-on-year decline, falling 7.9 per cent to 36.25. Payroll as a percentage of total revenue increased during 2010 to 32.2 per cent, some 3.9 percentage points higher than the UK benchmark. Additionally, food costs and energy costs are significantly higher than the wider UK average at 6.3 per cent and 5.1 per cent of total revenue. Most noticeably, the Gross Operating Profit (GOP) conversion of 28.0 per cent for four and five-star hotels in Leeds is much lower than that of the wider UK average at 38.8 per cent, a difference of 10.8 percentage points.

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 65.6% 35.8% 20.5% 68.4% 52.4% 16

HotStats 2011: UK & European Hotel Industry

European City Market: Madrid

Madrid has experienced significant growth over the last couple of decades and is now a major centre for international business and one of the largest financial centres in Europe. As a key financial centre, the Madrid economy was heavily impacted by the global economic downturn as well as the European debt crisis and recovery remains slow. Spanish GDP growth recovered slightly in 2010 to -0.1 from -3.7 in 2009. Madrid has recently been successful in promoting itself in national and international media and has attracted more conventions and hosted an increasing number of large international events such as the Champions League Final and the MTV Europe Awards during 2010, increasing hotel demand throughout the city. Madrid 4/5 Star Hotel Performance Indicators
2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 66.3 119.33 79.14 30.88 116.18 36.21 38.9 31.2 2009 59.6 119.69 71.34 29.14 106.44 28.49 41.0 26.8 % Variance 6.7 pts -0.3% 10.9% 5.9% 9.1% 27.1% 2.1 pts 4.4 pts

Departmental Revenue Contribution 2010

Other Depts. 4.3% Beverage 5.8% Food 17.4% Rooms 68.1% Rentals & Other 4.4%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total 0.6% 2.1% 2.6% 3.2% 7.2% 4.0% 0.4% 9.8% 38.9% 31.2% 100.0%

The Madrid hotel market has recovered significantly compared to 2009 performance figures with a considerable increase in rooms occupancy and rooms RevPAR of 6.7 percentage points and 10.9 per cent respectively. Despite the increase in demand growing occupancy to 66.3 per cent, there was a marginal reduction in average room rate of 0.3 per cent to 119.33 due to the current price sensitive nature of demand. Despite strong initiatives to improve the leisure tourism profile of Madrid, the city remains primarily a business-led destination, with a large proportion of hotel demand originating from corporate visitors. The highest levels of rooms occupancy are usually achieved from March to June and September to November with some hotels closing during August due to very little demand. It is estimated that throughout 2010 the number of visitors to Madrid increased by 2.8 per cent to 7.4 million with overnight stays also increasing by 3.8 per cent to 14.2 million. The majority of the Madrid hotel supply is of a four and five-star standard, accounting for over 45,000 of the markets total roomstock. Space for hotel developments in the city is sparse with new hotel openings in 2010 being relatively small in terms of room numbers. New hotel openings in 2010 included the 54-bedroom Radisson Blu, the 80-bedroom Mercure Santo Domingo and the 124-bedroom Crowne Plaza, Barajas. Energy costs and food and beverage costs remain relatively low compared to other European cities at 3.2, 4.0 and 0.6 per cent of total revenue, respectively. Gross Operating Profits (GOP) as a percentage of total revenue increased by 4.4 percentage points to 31.2 per cent as payroll costs as a percentage of total revenue reduced by 2.1 percentage points to 38.9 per cent.
HotStats 2011: UK & European Hotel Industry

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 65.7% 25.4% 12.7% 62.9% 54.8% 17

European City Market: Manchester

Generating over 50 billion of Gross Value Added (GVA), Manchester contributes around 51 per cent of the Northwests total economic output and five per cent of the UK total. With economic growth outstripping that of the rest of the UK in the period from 2000 to 2009, Manchester is an important asset to the regional and national economy. Since 2004, approximately1,600 additional full-service hotel bedrooms have been added to the full-service hotel market. For the most part, additions to hotel stock included domestic and international brands and consequently many international brands are now represented in Manchester. Departmental Revenue Contribution 2010
Other Depts. 9.2% Beverage 11.6%
% Variance 1.9 pts -1.2% 1.6% -1.1% 0.2% 2.6% 0.0 pts 0.8 pts

Rentals & Other 3.1%

Manchester 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 69.8 78.20 54.57 36.45 97.15 34.03 30.5 35.0 2009 67.9 79.12 53.73 36.87 97.00 33.15 30.5 34.2

Food 20.0%

Rooms 56.2%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 2.6% 2.7% 2.6% 4.4% 4.7% 5.7% 1.4% 10.3% 30.5% 35.0% 100.0%

As a result of hoteliers competing aggressively on price, in order to capture the major corporate accounts in the city, rooms occupancy levels in Manchester hotels increased by 1.9 percentage points during 2010, to 69.8 per cent. This was at the expense of average room rate declining by approximately one per cent. As a result, hotels managed to increase their RevPAR by 1.6 per cent to 54.57. With Manchester being the third most popular destination in the UK, tourism plays an important role in Manchesters economy contributing approximately 5.5 billion and supported by approximately 8.9 million overnight visitors. Conference and business tourism generates significant levels of demand for Manchester hotels, generating 4.2 million delegates of which approximately two million stayed overnight. In Manchester city centre, three and four-star hotels account for approximately 70 per cent of total supply with the majority concentrated in the city centre. Outside the centre of Manchester, hotel supply is dominated by limited-service/budget products. In terms of future supply, there are approximately 500 bedrooms under construction in Manchester city centre, of which around 400 bedrooms are limited-service/budget products. Food and beverage revenues account for approximately 32 per cent of the total revenue, with a departmental operation profit 40.6 per cent. Overall profit conversion rates for Manchester hotels remained resilient during 2010 with Gross Operating Profit (GOP) increasing by 0.8 percentage points to 35.0 per cent as a percentage of total revenue.
HotStats 2011: UK & European Hotel Industry

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 67.7% 40.6% 9.5% 67.1% 56.2% 18

European City Market: Paris

In 2010, hotels in Paris benefited from approximately 15.2 million visitors generating 35.8 million roomnights, representing a growth of 5.4 and 5.7 per cent respectively. Paris hosted a high number of events, recording 959 congresses and events during 2010. The Paris hotel market comprises 1,472 classified hotels, of which around 40 per cent are branded properties. Whilst two and three-star hotels still account for around 76 per cent of all hotels, the number of four-star hotels has progressively increased over the past 15 years, while the number of two-star hotels continues to decline. Departmental Revenue Contribution 2010
Other Depts. 4.6% Beverage 6.6% Food 18.3% Rentals & Other 2.8%

Paris 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 76.1 199.62 151.81 64.66 224.24 72.41 39.0 32.3 2009 73.0 190.05 138.73 57.24 204.54 64.71 38.6 31.6 % Variance 3.1 pts 5.0% 9.4% 13.0% 9.6% 11.9% (0.4) pts 0.7 pts

Rooms 67.7%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 1.1% 2.4% 2.9% 2.2% 4.4% 4.8% 1.2% 9.7% 39.0% 32.3% 100.0%

Average annual rooms occupancy in the Paris hotel market reached 76.1 per cent during 2010, an increase of 3.1 percentage points on the previous year, with achieved average room rate increasing by 5.0 per cent during the same period to 199.62. As a result, RevPAR increased by 9.4 per cent to 151.81. Whilst overseas visitors from Paris two largest demand markets (UK and the USA) decreased by 5.8 per cent during 2010, overall foreign visits increased by four per cent. Domestic visits continued to increase comprising approximately 37.1 per cent of total roomnight demand in 2010. Due to the lack of available sites, Paris has seen little increase in the number of available bedrooms, although the trend to upgrade and redevelop hotels continues, as evidenced by the opening of Paris latest hotels the 81-bedroom Shangri-La and the 149-bedroom Le Royal Monceau Raffles Paris hotels. Future hotel developments include the opening of the 138-bedroom Mandarin Oriental Paris in summer 2011, W Hotel in 2012 and the opening of The Peninsula Paris in 2013. Due to the combined increase in demand levels and reduction in value added tax (VAT), as of July 1 2009, food and beverage RevPAR increased significantly by 13 per cent in 2010. Payroll costs remain high in Paris compared to the UK and other European markets, at 39.0 per cent of total revenue. Overall profit conversion rates for Paris hotels remain resilient with Gross Operating Profit (GOP) increasing by 0.7 percentage points to 32.3 per cent of total revenue.

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 68.9% 15.9% 0.3% 69.5% 53.2% 19

HotStats 2011: UK & European Hotel Industry

European City Market: Prague

Prague is the commercial hub of the Czech Republic, generating over 21 per cent of the countrys GDP. However, its economy remains relatively sensitive to changes in the economic performance of its main export markets, in particular Germany, which inturn was Pragues largest demand market for accommodation in 2010. Furthermore, tourism continues to play a pivotal role in Pragues economy and generates approximately 60 per cent of Pragues overall income. Prague benefited from approximately 4.7 million visitors during 2010 generating 12.1 million roomnights. Departmental Revenue Contribution 2010
Other Depts. 7.8% Beverage 6.9%
% Variance 4.4 pts -6.5% 0.3% 7.4% 1.4% -7.2% (1.2) pts -2.8 pts

Rentals & Other 8.1%

Prague 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 65.5 86.11 56.42 33.41 99.43 30.04 27.1 30.2 2009 61.1 92.13 56.26 31.10 98.05 32.37 25.9 33.0

Food 20.5%

Rooms 56.7%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 1.1% 4.7% 3.5% 6.1% 5.1% 5.5% 1.3% 15.3% 27.1% 30.2% 100.0%

As a result of increasing visitor numbers, average rooms occupancy increased by 4.4 percentage points to 65.5 per cent during 2010, although challenging trading conditions, continue to affect achieved annual average room rate which declined by 6.5 per cent. RevPAR performance held up well and food and beverage RevPAR increased by 7.4 per cent to 33.41. While Prague experienced an increase in visitor numbers of 8.9 per cent and a 7.8 per cent increase in roomnights during 2010, roomnight demand from the UK and Italy decreased by 1.6 and 8.6 per cent. That said, Prague enjoyed double digit growth from visitors coming from the USA, Russia, France, Slovakia, Japan, Austria, Denmark and Hungary. The most significant growth levels came from high-yielding Russian visitors, which increased by 31 per cent during 2010. Despite the recession, Prague continued to witness from an increase in hotel rooms, including the five-star 75-bedoom Kempinski and 160-bedroom Sheraton hotels and the 559-bedroom Clarion Congress Hotel in 2008, as well as the 210-bedroom Park Inn hotel and 101-bedroom Augustine hotel opened by Rocco Forte in 2009. As a result of an increase in roomnight demand and food and beverage RevPAR during 2010, Prague hotels managed to increase TrevPAR. Despite the increase in total revenue, a payroll cost increase of 1.2 percentage points to 27.1 per cent of total revenue and rising sales expenses as a percentage of total revenue, resulted in a decline in overall profit conversion during 2010. Gross Operating Profit (GOP) levels dropped by 2.8 percentage points to 30.2 per cent from 33.0 per cent of total revenue the previous year.
HotStats 2011: UK & European Hotel Industry

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 68.9% 36.6% 12.2% 70.1% 58.0% 20

European City Market: Rome

The Italian capital is one of the most visited cities in Europe and is home to the principal institutions of the nation including the government and the Vatican City. As the major financial and services hub in Rome, the city attracts significant corporate demand as well as leisure demand. The Rome hotel market is made up of approximately 900 graded hotels, with most upper-scale hotels independently owned. Hotel market room rates have incurred a tax of 2 per person for hotels rated up to 3-stars and 3 per person for 4 and 5-star accommodation. It will be interesting to see how this impacts hotel performance during 2011. Departmental Revenue Contribution 2010
Other Depts. 6.1% Beverage 6.6%
% Variance 3.9 pts -0.3% 5.5% 6.1% 4.9% 8.4% (2.7) pts 0.7 pts

Rentals & Other 2.5%

Rome 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 70.1 184.02 129.00 62.65 199.79 46.80 40.6 23.4 2009 66.2 184.57 122.25 59.02 190.48 43.16 37.9 22.7

Food 20.2%

Rooms 64.6%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 1.1% 3.5% 3.5% 3.8% 5.3% 4.7% 0.6% 12.5% 41.2% 23.8% 100.0%

The recession in 2009 impacted the Rome hotel market due to its reliance on international trade. However, the market performance during 2010 has been encouraging for Rome hoteliers as the economy recovers. Rooms occupancy increased by 3.9 percentage points to 70.1 per cent with average room rate remaining relatively stable at 184.02, ultimately resulting in an increase in rooms RevPAR from 122.25 in 2009 to 129.00 in 2010. Approximately 30 million people visit Rome each year and the city is the third most visited city in Europe after London and Paris. Leonardo da Vinci-Fiumicino was Europes sixth busiest airport in Europe in 2010 handling over 36 million passengers, an increase of 7.5 per cent compared to 2009. Furthermore, the total number of bednights generated by international tourists in Rome increased year-on-year to approximately 14 million, up 9.6 per cent. There is a relatively limited new full-service hotel supply pipeline for the Rome hotel market due to strict planning requirements and a lack of suitable sites for branded hotel developments. However, there were a handful of additions to supply during 2010 including the 151-bedroom NH Giustiniano. From an operating point of view, F&B RevPAR and GOPPAR increased by 6.1 per cent and 8.4 per cent respectively to 62.65 and 46.80. Food and beverage contribute over a quarter of all revenues, with rooms revenue accounting for 64.6 per cent. Given the favourable performance of 4 and 5-star hotels in Rome during 2010, profitability also increased as a percentage of total revenue to 23.4 per cent, an increase of 0.8 percentage points.
HotStats 2011: UK & European Hotel Industry

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 64.5% 13.6% 6.7% 63.8% 47.9% 21

European City Market: Warsaw

Poland continues to attract international interest due to the size of the economy and its relatively strong performance during the economic downturn, being the only EU country which did not to fall into recession during 2009. Polands economy expanded by 3.8 per cent during 2010, which was partly fuelled by investment in the forthcoming UEFA EURO 2012 football tournament. Warsaw is expected to benefit from favourable economic conditions for the next few years on the back of the football tournament, jointly hosted by Poland and Ukraine, and other significant investment projects. Departmental Revenue Contribution 2010
Other Depts. 6.2% Beverage 9.2%
% Variance 7.5 pts -3.5% 7.9% 5.6% 5.8% 8.8% 0.6 pts 1.0 pts

Rentals & Other 5.1%

Warsaw 4/5 Star Hotel Performance Indicators

2010 Rooms Occupancy (%) Average Room Rate () Rooms RevPAR () F&B RevPAR () TrevPAR () GOPPAR () Payroll Percentage of Total Revenue (%) GOP Percentage of Total Revenue (%) 71.5 89.79 64.23 44.18 116.00 41.31 25.3 35.6 2009 64.0 93.05 59.55 41.82 109.64 37.98 25.9 34.6

Food 24.1%

Rooms 55.4%

Percentage Distribution of Expenses 2010

Beverage Cost P&M Sales & Marketing Energy Costs Admin & General 1.8% 3.1% 3.6% 5.0% 4.5% 7.8% 1.5% 11.7% 25.3% 35.6% 100.0%

Average annual rooms occupancy in the Warsaw hotel market was exceptionally strong during 2010 increasing by 7.5 percentage points on the previous year to 71.5 per cent. Achieved average room rate reduced by 3.5 per cent during the same period to 89.79. As a result, RevPAR increased by 7.9 per cent to 64.23. The total number of inbound trips to Poland in 2010 totalled approximately 12.5 million, an increase of approximately five per cent on the previous year. The capitals hotel market largely depends on the corporate sector as its major source of demand, although Warsaw also benefits from significant and increasing leisure and group/tours demand. No new hotel supply was added during 2010; however, future projects include the 367-bedroom Doubletree by Hilton Conference Centre, a 250-bedroom Renaissance by Marriott at the Warsaw Frederic Chopin Airport and the former Warszawa hotel building is earmarked for redevelopment into a Luxury Class Boutique Hotel. During 2010, food and beverage RevPAR increased by 5.6 per cent to 44.18, which, coupled with a decrease in payroll and efficient cost control allowed hotels to achieve a food and beverage DOP of 39.0 per cent. Payroll costs remained low in Warsaw compared to the UK and other European markets equivalent to 25.3 per cent of total revenue. Overall profit conversion rates for Warsaw hotels remain strong, with Gross Operating Profit (GOP) increasing by one percentage point to 35.6 per cent as a percentage of total revenue.
HotStats 2011: UK & European Hotel Industry

Food Cost Other Department COS Departmental Expenses Payroll & Related Expenses Gross Operating Profit Total

DOP Percentage 2010

Rooms F&B Other Departments Rentals & Other Total as a % of Total Revenue 75.7% 39.0% 7.8% 63.6% 60.5% 22

HotStats provides a unique profit and loss benchmarking service to mid-market and full-service European hoteliers, which enables monthly comparison of a hotels performance against its competition. It is distinguished by the fact that it provides monthly analysis of up to 85 hotel profit and loss line items giving much deeper insight into hotel operations than only the three measures of occupancy, rate and revPAR to which other benchmark providers restrict themselves. The HotStats database now totals 1,400 properties representing more than 300,000 bedrooms. By precisely measuring hotel performance against competitors, HotStats is unrivalled in giving operators a highly effective tool for taking corrective action. HotStats Benchmarking Service HotStats Profitability Full profit & loss benchmarking Market Intelligence Reports HotStats Classic More than 80 metrics to get a total insight in a market place HotStats RevCounter All departmental revenues with market segmentation HotStats KPI Report Occupancy, Rate, RevPar, TrevPar, DOPPAR, GOPPAR and Payroll metrics HotStats RevPar Plus Rooms KPI with market segmentation HotStats RevPar Rooms KPI Industry Publications & Surveys UK Confidence Monitor Quarterly survey of UK hoteliers HotStats Publication Annual review on the UK hotel markets and European city markets UK Budget Publication Annual review on the UK budget market on supply and demand data Press Releases Monthly UK Chain Hotels Market Review Monthly European Chain Hotels Market Review For further information visit www.hotstats.com or contact: Mark Dickens Managing Director 020 7892 2207 mark.dickens@hotstats.com
HotStats 2011: UK & European Hotel Industry

David Stephens Senior Operations Analyst 020 7892 2217 david.stephens@hotstats.com

Tony Oliveira Commercial Analyst 020 7892 2234 tony.oliveira@hotstats.com

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Glossary
A&G - Administrative & General This covers items that are not easily attributable to any one department.It includes items such as management, administration, finance and accounting, stationery, uniforms, training, recruitment, etc. ARR & ADR - Average Room Rate & Average Daily Rate This is the average price each room is sold for in the hotel or group of hotels being analysed. It is calculated by dividing the room revenue by the number of rooms let. Beverage Revenue Beverage revenues are derived from sales of alcoholic beverages, soft drinks and cigarettes. Includes revenues from restaurant, conference and banqueting, room service and minibar operations and may include package revenue allocations but excludes beverage allowances. COS - Cost of Sales The cost of raw materials prior to their resale. DOP - Departmental Operating Profit The total revenue for the specific department named less costs for that department, ie cost of sales, payroll and direct expenses. F&B - Food & Beverage This covers restaurants, bars, room service and banquets and conferences (including room hire, etc). Food Revenue Total food revenues are derived from food sales, including sales of coffee, tea and milk to guests. Includes revenues from restaurant, conference and banqueting, room service operations and packaging revenue allocations, but excludes food allowances. IBFC / GOP - Gross Operating Profit For the purposes of this study, Gross Operating Profit is defined as the total departmental operating profit, less all undistributed operating expenses and is synonymous with IBFC (income before fixed charges). MOD - Minor Operated Departments These are departments within the hotel that are not covered in any of the other headings. For example, if the hotel offers guests laundry service, this would be a Minor Operated Department. Other examples included equipment rental or pool supplies. Occupancy This is the percentage of available rooms that have been sold over the period being analysed. It is calculated by dividing the number of room nights sold during the period by the total number of rooms available for sale in the same period. Other F&B Revenue All revenue generated in the food and beverage department, apart from through sale of food and beverages. This includes room hire, service charges, cover charges etc. P&M - Property & Maintenance Includes all items relating to the maintenance of the property and equipment. PAR - Per Available Room A measure that may be applied to any revenue or cost to facilitate analysis. The revenue or cost being analysed is divided by the total number of bedrooms available for sale during the period under analysis. Payroll and Related Expenses as a Percentage of Total Sales Calculated by dividing the sum total of payroll and related expenses by the total sales and then multiplying by 100. Percent of Departmental Revenue Expresses any given criteria as a percentage of the total revenue generated by the specific department to which it relates. Rooms RevPAR - Revenue Per Available Room Also known as Rooms Yield. Calculated by dividing the room revenue by the number of rooms available for sale during the period under analysis. Room Revenue Revenues from bedrooms and suites rented or leased for part of a day, week or longer, includes revenues raised from no-show charges where collection is reasonably certain and excludes allowances and cancellation fees. Total Operating Costs This sum is the cost of sales, direct expenses and payroll costs for any given department. Total Payroll The sum total of salaries and, wages, and employee benefits from all operated departments and all undistributed operating categories. Total Revenue Sum total of net revenues from all the operated departments plus rentals and other income. TrevPAR Sum total of net revenues from all the operated departments plus rentals and other income per available room (See PAR). UOE - Undistributed Operating Expenses his classification is used for administrative and general expenses, marketing expenses, energy costs, and property operation, and maintenance expenses. Each of these can be considered as an individual entity.

HotStats 2011: UK & European Hotel Industry

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HotStats 2011