Brits plump for premium hotels as budget stays suffer
The gap between hotel prices has continued to expand as Brits plump for premium travel over budget options, according to new figures.
Average room rates of UK luxury hotels rose from £380.30 to £405.18 in August year on year, and from £136.33 to £141.57 for mid market hotels, data from RSM shows.
Room rates in the budget hotel market, meanwhile, fell from £103.94 to £98.21 in the same period.
Similarly with occupancy, UK luxury hotels saw an increase from 76.1 per cent to 76.9 per cent in August year on year and rose from 82.4 per cent to 83.6 per cent in the mid market.
However, occupancy ticked down from 79.8 per cent to 78.6 per cent for budget hotels.
Robyn Duffy, consumer markets senior analyst at RSM UK, said the increased spending on luxury hotels was indicative of a “clear shift” towards high-end travel and experience-led purchases.
Despite a continuously tough market for physical luxury goods, spending on travel and experiences has continued to rise, with even high-end fashion houses increasingly focusing their attention on this area.
Budget hotels risk closure
Duffy added that geopolitical drama has only exacerbated this trend: “Economic uncertainty and rising prices across major luxury goods, exacerbated by tariffs, are prompting affluent consumers to trade handbags for holidays, redirecting spend from products to experiences.
“Luxury hotels, first-class airfares and ‘once-in-a-lifetime’ travel are all benefitting from this reallocation of spend.”
Chris Tate, partner at RSM UK, warned that budget hotels risk being “left behind” as their margins get ever-more squeezed.
Gross operating profits per available room rose nearly eight per cent for UK luxury and mid market hotels from £147.23 to £157.67 and £55.18 to £58.66 respectively in August year-on-year, but were down in the budget market from £40.06 to £37.24.
“[Budget hotels] already operate on lower margins, which are being squeezed even further as costs rise and consumers splash out on more premium experiences, resulting in a double whammy,” he said.