The accommodation industry in the UK has recovered rapidly since the recession. The number of employees in the industry increased by 20 per cent between September 2007 and 2017. Total employment across all industries, in contrast, rose by only 8 per cent over the same period. Record numbers of overseas visitors in 2017 resulted in a particularly successful year for the industry, with the percentage of rooms that were occupied also reaching a record high.
The accommodation industry, as defined by the Standard Industrial Code, can be broken down in four groups:
83 per cent of employees in the industry work in hotels and similar accommodation, with another 12 per cent employed in holiday and short stay accommodation. Although the hospitality sector is sometimes conflated with the accommodation industry, the hospitality sector in fact contains both accommodation and food services activities, such as restaurants and cafés.
Table 1: breakdown of the accommodation sector by type of accommodation
While this report focuses on pay and conditions in the hotel sector, figures for this industry alone are not always available. The report will clearly state whether statistics refer specifically to the hotel sector or to the whole accommodation sector. The figures for the whole accommodation industry are still relevant to this report because the overwhelming majority (83 per cent) of employees in the accommodation sector work in hotels.
The LFS provides insight into the make-up of the hotel sector workforce10. Employees in the hotel sector are more likely to be women, with almost three-fifths (59 per cent) of the directly-employed workforce being female. Employees also tend to be younger, with more than two-thirds (68 per cent) being under the age of 40. Across all employees, the figure is just under half (49 per cent).
Employees in the hotel sector are more likely to be part-time than the average employee. 36 per cent of employees in the hotel sector are part-time, compared to 26 per cent across all employees. Of those who are working part-time in the hotel sector, almost half (48 per cent) say that they do not want a full-time job, while 29 per cent are working part-time while they study. Over one-in-five (22 per cent) were unable to find full-time work.
According to the LFS, the majority of employees in the hotel sector are from the UK (62 per cent). However, this is a much smaller majority than across all employees, where around 83 per cent are from the UK.
Table 2: top 10 occupations in accommodation sector
Around a quarter of hotel sector employees (26 per cent) are from the EU. The LFS, however, tends to underestimate the number of foreign nationals in the labour force. The fact that outsourced workers are not included in these figures may lead to an underestimation of migrant workers in the industry. Results from a survey by the industry body, the British Hospitality Association (BHA), suggest that 34.1 per cent of workers in the hotel sector are EU nationals.
Migrants are particularly vulnerable to exploitation as they are less likely to be aware of their rights. In the words of one union member in London; ‘You won’t find people with good English employed by the agency. They don’t want people who can discuss their rights.
In 2016, the approximate gross value added at basic prices (aGVA) generated by the accommodation sector in the UK economy was estimated to be £14.9 billion14. aGVA is the amount that a sector contributes to the economy. It’s calculated by finding the difference between the value of goods and services produced by a company (the output) and the cost of raw materials and other inputs that are used up in production of those goods and services.
London was the highest contributing region, with an aGVA of £3.8 billion. The figure was above £1 billion in the North West, the East of England, the South East, the South West and Scotland. The regional breakdown of employment by region in 2017 reveals a similar pattern. The five regions where the accommodation industry has an aGVA of over £1 billion also have the highest number of employees.
While the industry’s recovery since the recession will be discussed in greater depth later in this section, it’s worth noting that the industry grew in every region between 2008 and 2016. Even the region with the weakest accommodation industry, the North East, has seen a rise of £125 million (53 per cent) in aGVA. Every other region, however, has seen increases even higher than this. The figure has risen by 125 per cent in the North West, 89 per cent in the East Midlands and 83 per cent in Yorkshire and the Humber.
The industry’s recovery after the recession has been impressive. 2016 marked the industry’s seventh year of consecutive growth. The industry’s 2016 aGVA of £14.9 billion was an increase of 73 per cent since 2008.
Although the rate of hotel rooms in the UK occupied during the summer fell from 72 per cent to 68 per cent between 2007 and 2009 because of the financial crash, this rate jumped to 74 per cent in 201017. The summer occupancy rate then dipped slightly in 2012 to 73 per cent, before rising to 77 per cent in 2013 and continuing to grow consistently since. It reached a record level of 82 per cent in 2017, however there was a methodological change in June 2017 that means this figure cannot be compared to the figures from previous years.
There’s also been a recovery in the industry’s standard measure of success, the Revenue per Available Room (RevPAR), since the end of the recession. RevPAR is calculated by multiplying the average daily rate of a room by the occupancy rate. After falling slightly in 2009, the RevPAR for London had recovered and exceeded its pre-recession peak by the following year. According to PWC, between 2008 and 2016, London hotels saw RevPAR rise by 23 per cent from £98 to £121. Although it has taken longer for hotels outside of London to recover, RevPAR reached £54 in 2017, compared to £46 in 2008.
2017 was a particularly successful year for the accommodation industry, driven partly by a record rise in the number of overseas visitors to the UK. Revenue per Available Room (RevPAR) also reached record levels in the same year. Knight Frank, an estate agency and property consultancy, estimate that London’s RevPAR rose by 8.6 per cent in 2017 to £136. Hotels outside of the capital saw RevPAR rise by 6.4 per cent to £67. Knight Frank also conclude that Gross Operating Profit Per Available Room has risen despite increased overheads.23 An estimated 17,000 new rooms opened in the UK over the course of the same year, with 50 per cent of new hotels opening in London.
While it is true that the positive effect of a falling pound may be temporary, market analysts predict that the industry’s success will continue through 2018. Knight Frank forecast continued nominal growth in RevPAR in both London and the regions in 2018, albeit at a slower rate. Occupancy is set to remain at its high levels in the regions, while the rate for London hotels was forecast to fall by 0.5 per cent in 2018. Another consultancy company, PwC, are even more optimistic about the industry’s performance in 2018. Unlike Knight Frank, PwC forecast growth of 0.2 per cent in the occupancy rate of London’s hotels, with marginally higher growth in the regions. In nominal terms, they predict that RevPAR will grow by 2.4 per cent in London and 2.3 per cent in the regions. In real terms, they expect that RevPAR in London will stay above pre-recession levels, but outside London to be 6.6 per cent lower than it was in 2007. Despite this, PwC believe that the outlook for the industry in 2018 will be ‘reasonably strong.’
The UK’s biggest hotel chains are also booming. The country’s largest hotel chain, Premier Inn, saw its underlying operating profit increase from £457 million in 2016/17 to £498 million in 2017/18, a rise of 6.5 per cent. Its total sales grew by 5.2 per cent, while the chain opened 4,385 new rooms. Intercontinental Hotels Group (IHG), owner of chains including the Holiday Inn and the Crowne Plaza, report that RevPAR rose by 2.7 per cent in 2017 and group operating profit rose by 12.5 per cent. Its annual report announces increased returns for its shareholders. In their most recent publicly-available annual report, Travelodge had increased its total revenue by 6.6 per cent, and its RevPAR by 2.9 per cent.
As the section below on pay will make clear, the fruits of the industry’s success are not being evenly shared. Although these companies are happy to boast about their financial success when they talk to their shareholders, they paint a different picture while trying to justify the Dickensian wages they pay their staff.
Last year, Intercontinental Hotels Group (IHG) announced that they would break their promise, made during the 2012 Olympics, to introduce the real Living Wage in their hotels. Despite rising profits, IHG had the audacity to cite rising employment costs as the reason for their failure to pay their employees the real Living Wage.
Excessive executive pay coexists with poor wages across the industry. Travelodge paid its board of directors a combined total of £5.4 million in 2017. Its best-paid director saw their remuneration package double, from £1.2 million to £2.5 million. In comparison, the average hotel sector employee is paid £8.15 per hour. Whitbread paid its board and CEO a combined total of over £4.7 million in the 2017/18 financial year. The company’s CEO, Alison Brittain, was paid over £2.3 million