2010 proved to be another challenging year for the UK economy, VAT returned to over 17 per cent, inflation climbed to 3.7 per cent its highest point in roughly 18 months, oil and energy prices increased, all amidst the inauguration of a new  coalition government.

Despite the ever fluctuating economic and political activity, the UK economy emerged from the recession during 2010 with
GDP growth of 1.3 per cent compared to -4.9 per cent during the previous year.

This resulted in a recovery in hotel market conditions for the first time since the economic downturn began in September 2008. The continuing strength of London's hotel market is the most significant factor influencing the overall UK performance

Rooms occupancy and average room rate increased during 2010 resulting in a considerable rise of 6.2 per cent in rooms
RevPAR. ‘Staycations' continued to be a significant driver of demand during the summer holiday period as UK based tourists continued to swap their overseas holidays for the UK regions.

The number of overseas visits made by UK residents were down 6 per cent compared to 2009 as a result.

UK tourism's downward trend continued during 2010 with 29.6 million overseas residents visiting the UK. The bad weather
which swept the UK caused a sharp fall in the number of overseas visitors to the UK as heavy snow and ice caused severe travel disruptions. The UK hotel market was significantly affected by the bad weather due to a large number of cancellations and severely reduced access.

There is still a feeling of uncertainty surrounding the UK economy and the operating environment of the hotel market with a number of potential hotel developments and transactions still being postponed due to lack of funding.

However, most hoteliers are feeling slightly more optimistic about what lies ahead as operating figures show signs of recovery having bottomed out during 2009. Payroll costs decreased at 28.3 per cent.

Energy prices fell from 4.5 per cent as percentage of total revenue as hoteliers seek ways to run a more efficient operation, finishing at 3.7 per cent. Profit conversion rates for UK hotels increased marginally with Gross Operating Profit (GOP) rising by 1.1 percentage points to 38.8 per cent as a percentage of total revenue.