Birmingham’s hotel sector has seen something of a renaissance in recent years. Ever since the arrival of the Hyatt in Broad Street almost 20 years ago, the city has become increasingly attractive to large and small operators alike.
However, as the recession starts to bite, companies and individuals are frantically searching for ways to save money and it is business expenses and personal leisure outlay that appear to be in the vanguard of this new thrifty approach.
A recent report by PricewaterhouseCoopers revealed that occupancy rates in Birmingham have declined and revenue per available room also decreased for the third month in a row to September, to be down by 2.4 per cent .
But despite predictions that the situation will get worse in 2009 as the country sinks deeper into recession, hoteliers in the city believe that things could be a lot worse.
Kathrine Ohm Thomas, general manager at the 39-storey Radisson SAS on Holloway Circus Queensway, said: “Everyone can see that occupancy rates in the city have gone down but ours have not. Our RevPar is the same but we are the new kid on the block, even though we have been here for three years. We are in a fantastic location, very noticeable from a building point of view. We know the city and the city knows us.
“September was slow for us despite the Conservative Party conference but we had a very good August. It was a little strange because things usually pick up in September but they got going a little bit later this year, it’s almost as if people hesitated initially but since then October, November, December has been extremely busy.
“We get a lot of corporate business in midweek and we get some of the business people returning for leisure to enjoy a weekend in Birmingham. It is fantastic that Birmingham has so much to offer.”
Mark Davies, general manager of Hotel Du Vin, said occupancy rates for the 66- bedroom hotel have also remained high and are in line with its budget at 79 per cent.
He said: “We are where we should be at the moment. We are more of a budget hotel compared to the higher-end Radisson and Malmaison in the Mailbox, so I would say we are a bit more immune. We have a good location, close to businesses, accountancy and law firms and we have been here for a long time and we do have a reputation for our bistro.”
Mr Davies said the hotel had also managed to retain its price of £115 per room, down by just £6 on last year. He added: “What we are finding is that bookings are more last-minute, and people will ring less than 24 hours in advance to book a room. But I think the fact that we are keeping up occupancy rates shows that Birmingham is a good city that people do want to visit. Next year will be more challenging.”
The report by PwC said 2008 had been lacklustre for the Birmingham hotel industry with buyers, not sellers in the hotel industry in the driving seat. It said rates had held up and remained in positive territory overall but it predicts that
Birmingham will see RevPar fall by 0.5 per cent to £41.34. Occupancies are expected to slip but recover to 65.9 per cent in 2009 while room rates are anticipated to fall by 0.4 per cent this year and a further 2.7 per cent in 2009, taking rates to £62.63.
While some of the more luxury hotels say they can be more flexible with their rates, depending on the market and other available offers, budget hotels feel it’s crucial to keep prices constant. Nitenite, which opened its’ first ‘test’ hotel in Holliday Street, Birmingham, five months ago, offers rooms from £44 per night.
The group plans to open 30 budget hotels in city centre locations over the next six years - a £120million programme which will capture four per cent of the budget market.
Chief executive Colin Hatt said: “We are expecting a slight drop; however ,dropping the prices is not the answer. I have spoken to specialist consultants and they say that, in the last recession, hotels made a big mistake by dropping their rates and it takes years to recover. If you drop rates and occupancy falls, you are in trouble.
“We have maintained our rates but we offer very good value for money. It costs £44 online to stay in the city centre but what we are doing is offering more to entice the customer. We are offering free Wi-fi and, after Christmas, we are introducing free movies.
“We are down five per cent on last year but, overall, we are pleased. We offer a clean environment at the right price, we tick all the boxes. If our customers’ expectations are exceeded, they return.”
Roy Tandy, who leads PwC’s work in the hospitality and leisure sector in the Midlands, warned that hoteliers would face more challenging times in 2009.
He said: “Continuing turmoil in the financial markets coupled with the sharp global economic slowdown and negative consumer and corporate sentiment means that city hoteliers are facing more challenging times than ever.
“However, Birmingham is better-placed than many of its’ regional counterparts to weather the storm by virtue of the fewer new rooms being available in 2009 than previously expected.
“Furthermore, budget hotels in the city are particularly resilient and will benefit from the trading-down effect. While no one is immune from the effect of a recession, those who offer attractive value-for-money products will appeal to cash-strapped businesses and consumers. If the experience justifies the expense, many travellers may stick with these brands after the frost of the recession melts away.”
Currently there are just under 5,000 bed spaces within a ten-minute walk of the International Convention Centre. Around 800 new hotel rooms are under construction in Birmingham, including The Westin - the first five-star hotel to open for some years. A further 1,163 rooms are listed as at the outline planning stage and The Hoxton has also announced plans to open a ‘cheap but chic’ hotel in Birmingham.
Ian Taylor, director of Marketing Birmingham, said: “Birmingham has always been very competitive from a hotel point of view. There has been a lot of investment over the last couple of years with the Malmaison, Radisson and budget hotels such as the Etap - a lot of stock has come into the market. The current economic climate is very challenging, not just for hotels but across the board. I would recognise that while there has been a slight decline as the report shows, the hotels are responding to that by offering added value which is important as consumers become more savvy.
“We are finding that serviced apartments have seen real growth, people are realising there is more choice in the market. What we are also seeing, because of Birmingham’s location, is that we are getting a lot of day visitors.
“In terms of looking forward, we are going to have to be on our mettle next year; everyone has to stay on top of their game to remain competitive. We have some big events booked like the Rotary International convention at the National Exhibition Centre in June which will bring in 20,000 people.”
He added: “A lot of corporate clients’ budgets will be pressed more than before but we will continue to work hard to attract major events to the city.”