Moscow and London spend the least on labour relative to the volume of sales, according to a survey by TRI Hospitality Consulting's HotStats service. The survey was based on 10 leading European cities

At hotels in the best performing city, Moscow, payroll represented just 24.0 per cent of turnover for the month of January 2007. In London, the payroll percentage was 28.7 per cent, the only other city below 30 per cent during January.

"Staff costs are a critical component of profitability and it is therefore no surprise that both Moscow and London usually top our survey when measuring the highest earning hotels," said David Bailey, managing of TRI Hospitality Consulting.

Half of the cities in the survey saw labour costs falling with Berlin and Paris the best performers, showing drops of 4.1 and 3.7 percentage points respectively. Despite these drops, however, Berlin and Paris still have the fifth and third highest payroll percentage respectively.

Budapest was the only city that saw a double digit percentage point rise in labour costs, going up

10.3 percentage points to be the second highest in the survey at 44.4 per cent. "East European cities usually have the lowest payroll percentages but a significant drop in occupancy in Budapest during January hit hotels in the Hungarian capital hard and left them unable to flex their workforce quickly enough," said Bailey.

London sales performance also strong

The good news for London hotels did not end with the payroll figures: London hotels were the top performers in Europe for occupancy, room rate and room revenue per available room during January.

The UK capital was more than Eu10 ahead of its nearest rival, Paris, in the 10 cities in the regular study. London revpar was Eu144.10 compared to Eu132.45 for the French capital.

"London is continuing the strong showing it made in 2006 into 2007. A more accurate picture will not emerge until after Easter but the early signs are that this will prove another bumper year for hotels in the UK capital," said Bailey.

In terms of rate of growth, only Moscow put in a better performance than London with a 27.3 per cent rise compared to London's 19.0 per cent rise.

Last year London was also in top place in terms of revpar and occupancy but Paris had a better room rate performance. A year later, and the gap between Europe's two leading cities has grown bigger: In January 2006 the revpar gap was just Eu5 rather than the nearly Eu12 it is in January 2007.

The main threat to London's supremacy may not be Paris but rather Moscow, at least if current trends continue. Its strong rate of growth meant it all but overtook Amsterdam to come in at third place in terms of revpar.

In January 2006 Moscow was almost Eu14 behind the Dutch city but in January 2007 it was just 12 cents behind, in revpar terms.

This is despite Moscow having the second worst occupancy during January of just 51 per cent, markedly different to the 74.9 per cent achieved in London.

"The main challenges for Moscow are finding a year round business and building a stronger leisure market," said Bailey.

Budapest is big loser

The big loser in January 2007 was Budapest which suffered a 17.0 per cent drop in revpar compared to the same month in 2006. The main cause was plummeting occupancy, down 10 percentage points to hit just 42.5 per cent.

Budapest's East European rival, Prague, also had a bad month with a 9.9 per cent drop in revpar, again thanks to a poor occupancy performance that saw it fall by 6.7 points to just 54.6 per cent. Munich was the surprise success story of the month with the third biggest rise in revpar of 16.2 per cent, putting it just behind Moscow and London.

Berlin also put in a reasonable performance with an 8.1 per cent rise but Hamburg was down a significant 5.9 per cent to Eu51.62, leaving it only ahead of Budapest.

"After a strong year in 2006 thanks to the World Cup, Germany's hoteliers face a much more challenging 12 months. So far, the overall picture is reasonable although there is still much to play for," said Bailey.

For more information contact David Bailey on +44 (0)20 7486 5191 or email david.bailey@trihc.com.