| September 21, 2005 - The strike by Gate Gourmet, the catering supplier
of British Airways (BA), in August and the subsequent walk out of BA�s
ground staff, helped boost the performance of hotels in the Heathrow area
by over 50%. Using data from our newly launched service Daily HotelBenchmark�
by Deloitte, we examine the impact the strike had on the Heathrow hotel
market not just on the major days of the strike but also throughout the
whole month of August.
What a big difference a few days in August makes Heathrow is the world�s busiest airport handling 67.7m passengers per year, however normally seamless travel through the airport was interrupted during August by unofficial industrial action by BA ground staff in support of colleagues at Gate Gourmet, the sole catering supplier of the airline. Given the significant share of traffic that British Airways enjoys at Heathrow, the strike caused a ripple effect throughout the local area which affected support staff, local hotels and of course the passengers. The dispute at Gate Gourmet was triggered by the company�s decision to sack hundreds of staff following a dispute over working practices. What few anticipated was that BA ground support services staff would walk out in support of their fellow workers causing chaos at the airport. The strike action started at 2pm on Thursday 11 August when BA was forced to suspend all outbound flights as it could not service any flights. By 6pm all flights were suspended and services did not resume until Saturday 13 August. However the consequences were felt for days afterwards as BA had to reschedule planes and crew to clear the backlog of stranded passengers around the world. On Saturday 13 August, BA managed to operate up to 85% of its scheduled short-haul services and around 80% of long-haul services. By Monday 15 August short-haul flights within the UK and Europe had resumed a regular service; however long-haul flights took a few extra days to return to normal, in the main because the aircraft, pilots and crew were displaced across the world. During the unofficial strike by ground staff, BA had to cancel nearly 700 flights and around 70,000 passengers were stranded in Heathrow and other airports worldwide. This caused BA to report a 4% fall in the number of passengers carried across its global network during August. Not surprisingly with passenger number down, the airline�s revenue per passenger km fell 0.7% compared to August 2004. Reflecting the significance of BA at Heathrow airport, terminal passengers fell 3% during August according to British Airports Authority (BAA). Not all bad news Whilst the cancellation of flights was clearly devastating for all those affected, the plight of passengers created an unexpected surplus demand for hotel accommodation in the Heathrow area. Whilst many travellers opted to spend the night within the airport terminals; many sought the comfort of local hotels to await their flight�s departure. The strike and following backlog of flights helped Heathrow hotels report revenue per available room (revPAR) increases of over 50% compared to the same three days last year. As seen in the graph below, increases in occupancy were the main drivers of revPAR growth over the three days. On Thursday 11 August hotels reported the best performance of the whole month with revPAR reaching £71, some £6 higher then the next best performing day Wednesday 31 August. Over the three days of the strike, occupancy exceeded 90%, an average growth rate of nearly 30% compared to the same period last year. On Friday and Saturday, Heathrow hotels achieved revPAR of £56 and £54 respectively, again the best performance for a Friday and Saturday night during the month. The worst performing weekend of the month was ironically the long August bank holiday weekend where revPAR fell on average 6% compared to last year. This was the first bank holiday weekend since the London bombings on 7 July and reflects the overall fall in demand experienced by hotels in the capital, predominately by the leisure market. Percentage change in Heathrow hotel performance - August 2005 v 2004  11 August 2005 Thursday 12 August 2004) and not between the same dates. Source: HotelBenchmark� Survey by Deloitte No more imminent strikes Latest results for Heathrow, derived from the monthly sample of hotels participating in the HotelBenchmark� Survey, reveal that revPAR increased 5.1% in August 2005 to reach £51, compared to August 2004. Heathrow hotels performed better than their central London counterparts where revPAR tumbled 11% to £64 as visitors shunned the capital, following the July bombings. Heathrow�s revPAR for year-to-August 2005 is up 6%, and growth continues to exceed the regional UK average. Since Gate Gourmet and the union representing its employees have now reached an agreement, BA and Heathrow will be pleased to have no further imminent strike threats looming. As we look towards the future, Heathrow hotels look set to enjoy future prosperity benefiting from continued expansion of the airport. Terminal Five is due to open in less than 950 days on 30th March 2008 and will give Heathrow the capacity to handle an extra 35m passengers per annum. This should have a positive impact on Heathrow�s future hotel performance, especially as new supply is limited. The last new hotel opening was the Jurys Inn (November 2004) and the only other known hotel development in the pipeline is the new Sofitel which will form part of the new Terminal 5 complex. Notes: All analysis in UK pounds. The HotelBenchmark� Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,500 hotels and 1.2 million rooms every month. |