Positive Peel to stay on cost-cutting path

However, the group, which owns Leeds' Cosmopolitan Hotel and Bradford's Midland Hotel, said it must continue to cut costs and innovate through marketing to compete in an "essentially oversupplied regional marketplace".

Peel increased revenue per available room (revpar) – a key metric in the hotel industry – by six per cent on a like-for-like basis in the 28 weeks to August 22, compared with a year earlier. Within this, occupancy was up 11.4 per cent but the average room rate fell 4.8 per cent.

Revpar was also driven up by more foreign tourists and a major marketing campaign, Peel said.

Occupancy improved at all of its hotels apart from the Strathdon in Nottingham and the Midland in Bradford.

Chairman Robert Peel said: "A like-for-like increase of six per cent on revpar in the period is certainly a positive sign of regaining an acceptable level of profitability within the company.

"However, an ever-tightening cost base together with innovative marketing techniques are required to counter-balance what is an essentially oversupplied provincial market place within a cost-cutting commercial and Government environment.

"The directors hope there will be grounds to consider recommending a modest dividend in respect of the current financial year if occupancy continues to grow."

Peel's pre-tax profits during the period surged 33.4 per cent to 102,379. Turnover was up 15.1 per cent to 8.3m and like-for-like sales were up 4.4 per cent.

Its shares were unchanged yesterday at 65p valuing the company at 9.1m.

Peel, which has nine hotels, stretching from Bournemouth to Dunfermline, spent 1.5m on revamping the former Golden Lion Hotel in Leeds last year, changing the 89-bedroom hotel's name to the Cosmopolitan.

Peel said it reduced capital expenditure to 326,299 during the period to conserve cash "in what still is an uncertain market place".

Net debt decreased by 611,339 to 14.2m and Peel said it is trying to sell two surplus properties, in Newcastle and Oxfordshire, to help bring down debt.

Peel will pay more interest on its debt after its bankers increased the margin on its debt.

"While we are not happy in regard to these additional charges and increased margins, we understand that these new banking rates are competitive in the overall provincial hotel market place," said Mr Peel.