MIDDLE EAST & AFRICA
Profit per room at hotels in the Middle East & Africa continued its downward spiral in May as year-on-year GOPPAR levels plummeted by -21.5% as revenue fell across all departments and costs continued to escalate, according to the latest worldwide poll of full-service hotels from HotStats.
In contrast to previous months when hoteliers in the Middle East & Africa have struggled to maintain rate, this month it was room occupancy which fell away, decreasing by 5.5-percentage points year-on-year, to 59.1%.
The considerable year-on-year decrease in volume in May contributed to the plummeting revenue performance across all departments at hotels in the region.
This not only included a -9.1% drop in Rooms Revenue, but significant declines were also recorded in Non-Rooms departments including a drop in Food & Beverage (-10.4%), Conference & Banqueting (-10.1%) and Leisure (-10.4%) revenue on a per available room basis.
As a result of the blanket decline in revenues, TrevPAR at hotels in the region fell by -9.4% in May, to $174.44. This represented a 29.1% month-on-month decline in TrevPAR; however, this is not out of the ordinary at this time of year due to the timing of Ramadan as well as the temperature in the region, which heats up and performance levels fall away.
The decline in revenue levels were hit once again by rising costs, which included a 2.4-percentage point increase in Payroll, to 30.9% of total revenue, as well as a 2.5-percentage point uplift in Overheads, to 29.5% of total revenue.
As a result of the movement in revenue and costs this month, profit per room in the region fell to $52.52, equivalent to a profit conversion of 30.1% of total revenue, which is well below the conversion for year-to-date 2018, at 39.6%.
Furthermore, on a rolling 12-month basis, profit per room at hotels in the Middle East & Africa was recorded at $73.24 this month, which is more than $20 below the same period in 2014/2015 at $94.16 and represents a significant rate of profit decline in recent years.
Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)
May 2018 v May 2017
RevPAR: -9.1% to $97.39
TrevPAR: -9.4% to $174.44
Payroll: +2.4 pts to 30.9%
GOPPAR: -21.5% to $52.52
“May marked the start of Ramadan this year, during which hotels in the region suffer a weakening in hotel performance.
The holy festival typically marks the beginning of the summer, which is sure to be another lean period for hotels in the region and although reducing costs should help somewhat, it is likely that profit levels will continue their downward trajectory. This will be much to the disappointment of hotel owners and operators across the region,” said Pablo Alonso, CEO of HotStats.
This month was a tale of contrasts for hotel markets in the Middle East & Africa, as performance fell away for commercial-led markets, such as Riyadh, due to the timing of Ramadan, but soared in holy cities, such as Makkah.
Hotels in Riyadh recorded a -34.9% year-on-year decline in TrevPAR this month, to $164.45, as a result of falling revenues across all departments, including Rooms (-35.2%), Food & Beverage (-35.1%) and Conference & Banqueting (-53.3%).
In addition to, and as a result of, the decline in revenues, hotels in Riyadh suffered an uplift in Payroll costs in May, which increased by 12.4-percentage points, to 34.6% of total revenue.
Further to the movement in revenue and costs, profit per room at hotels in the capital of Saudi Arabia plunged by -65.4%, to just $43.15. This represented the largest year-on-year decline in GOPPAR since September 2015 and meant that profit levels fell to less than half of the year-to-date average, at $99.47.
In line with the decline across the region, falling volume levels were a key contributor to the declining revenue levels at hotels in Riyadh, with room occupancy falling by -12.1-percentage point year-on-year, to 52.8%. As a result of the reduced demand levels, hoteliers had little selling power and achieved average room rate fell by 20.3% in May, to $173.46.
The commercial sector was a major contributor to the falling volume and price, illustrated by the achieved sector rates, which plummeted in the Corporate (-24.1%) and Residential Conference (-80.6%) segments. Commercial demand in Riyadh contributed more than 52% to the total number of accommodated roomnights at hotels in the city in the 12 months to May 2018.
Profit & Loss Key Performance Indicators – Riyadh (in USD)
May 2018 v May 2017
RevPAR: -35.2% to $91.50
TrevPAR: -34.9% to $164.45
Payroll: +12.4 pts to 34.6%
GOPPAR: -65.4% to $43.15
In contrast to the performance of hotels in Riyadh, hotels in Makkah performed well in May, recording a +114.1% increase in profit per room for the month as the holy city welcomed thousands of Muslims who made the pilgrimage from global origins.
The premium performance was driven by growth in Rooms Revenue, which increased by +65.3% on the back of a +5.3-percentage point increase in room occupancy, to 64.3%, as well as a 51.6% increase in achieved average room rate, which hit $304.56.
The growth in Rooms Revenue, in addition to increasing Non-Rooms revenues contributed to the +57.2% year-on-year increase in TrevPAR at hotels in Makkah in May, to $271.97, this was equivalent to an uplift of almost +$100 on the same period in 2017.
In addition to the uplift in revenues, hotels in Makkah successfully recorded a decline in Payroll levels, which contributed to properties recording a profit conversion at a punchy 61.1% of total revenue.
“Profit performance at hotels in Makkah peaks twice per year, once at the beginning of Ramadan and then again in Hajj, which this year will be in August. This year was no different as top and bottom line performance in the holy city soared this month,” added Pablo.
Profit & Loss Key Performance Indicators – Makkah (in USD)
May 2018 v May 2017
RevPAR: +65.3% to $195.81
TrevPAR: +57.2% to $271.97
Payroll: -8.4 pts to 16.2%
GOPPAR: +114.1% to $166.10
EUROPE
Following twelve consecutive months of year-on-year profit growth, hotels in Europe recorded a -3.6% drop in GOPPAR in May which was due to falling revenues and rising costs.
The lengthy positive period of performance for hotels in Europe came to an end despite Rooms Revenue remaining flat at €131.46 per available room.
Instead it was a decline in revenue across all Non-Rooms departments, including Food & Beverage (-3.7%), Conference & Banqueting (-8.8%) and Leisure (-5.4%), which led to the 1.1% decline in TrevPAR in May, which fell to €193.66. This was also the first time since April 2017 that hotels in Europe have recorded a decline in TrevPAR, illustrating the strength of performance in the region over the last year.
In addition to the drop in revenue across Non-Rooms departments, hotels in Europe suffered a +1.2-percentage point increase in Payroll, to 31.6% of total revenue, as well as a +0.4 percentage point uplift in Overheads, to 20.1% of total revenue.
As a result of the movement in revenue and costs, profit per room at hotels in Europe fell by -3.6% in May to €75.43, which is equivalent to a profit conversion of 38.9% of total revenue.
Profit & Loss Key Performance Indicators – Europe (in EUR)
May 2018 v May 2017
RevPAR: +0.0% to €131.46
TrevPAR: -1.1% to €193.66
Payroll: +1.2 pts to 31.6%
GOPPAR: -3.6% to €75.43
Despite the negative year-on-year performance for hotels in Europe in May, GOPPAR for the month remained 50.1% higher than the year-to-date average for the region at €50.25.
May was also the first month since October 2016 that hotels in Europe have failed to record a year-on-year increase in RevPAR. And whilst hotels in the region successfully recorded a 2.1% year-on-year increase in achieved average room rate this month, to €174.48, this was entirely wiped out by a 1.6-percentage point decline in room occupancy, to 75.3%.
Although hotels in Europe were able to maintain the upward momentum in achieved average rate in the commercial sector in May, which included an uplift in the Residential Conference (+8.0%) and Corporate (+4.9%) segments, declines were recorded in the leisure segment this month, led by a -3.1% year-on-year drop in rate in the Individual Leisure rate.
“In line with the buoyant economic growth in the Eurozone and against any predictions from the doomsayers about the fallout from Brexit, hotel profit performance in Europe has gone from strength to strength since October 2016, hitting a high in the rolling 12 months to April 2018.
The positive GDP growth forecasts for the region and record-breaking tourism growth in recent years suggest this is more of a blip than a major cause for concern,” said Pablo Alonso, CEO of HotStats.
Amsterdam was one of the key hotel markets in Europe which struggled to turn a profit in May as commercial demand fell away and demand from the leisure segment was underwhelming.
In line with the wider European market, despite hotels in Amsterdam recording a +1.6-percentage point increase in room occupancy, to a punchy 87.4%, as well as a +0.5% increase in achieved average room rate, to €265.93, the +2.3% year-on-year increase in Rooms revenue in May was almost entirely wiped out by falling Non-Rooms revenues.
Primarily as a result of a -6.3% decline in Food & Beverage revenue, as well as a -23.2% drop in revenue from the Conference & Banqueting department, TrevPAR growth for May was muted at just +0.5% year-on-year, to €307.60.
The performance challenges in the Dutch capital in May were further exacerbated by rising costs, which included a 0.4-percentage point increase in Payroll, to 24.8% of total revenue.
The increase in costs meant that profit per room at hotels in Amsterdam remained flat in May, at €148.25. However, this month remained one of the strongest performing of the last 12 months, second only to September 2017, when GOPPAR peaked at €149.38.
Profit & Loss Key Performance Indicators – Amsterdam (in EUR)
May 2018 v May 2017
RevPAR: +2.3% to €232.36
TrevPAR: +0.5% to €307.60
Payroll: +0.4 pts to 24.8%
GOPPAR: +0.0% to €148.25
Despite the flat performance this month and a mixed start to the year, profit per room at hotels in Amsterdam has increased by +1.8% for year-to-date 2018, to €98.40, which is further to the strong profit performance in 2016 (+3.9%) and 2017 (+4.5%).
“Amsterdam has been one of the most reliable hotel markets in Europe for owners, operators and investors in recent years with performance showing no signs of relenting.
Whilst recent protests about the ‘Disneyfication’ of the Dutch capital are less than positive, the reaction from local government, which included a moratorium on new hotel development, greater control over properties in the sharing economy and potential investment to encourage tourists to explore ‘Greater Amsterdam’ will buoy local residents and existing hoteliers,” added Pablo.
Paris was one of the markets to benefit from an uplift in demand from the leisure segment in May, as the city’s hoteliers were able to leverage an increase in rate in both the Individual Leisure (+19.3%) and Group Leisure (+2.6%) segments.
This contributed to the +3.2% overall increase in achieved average room rate for the month, to €372.18, which, in addition to a 2.8-percentage point increase in room occupancy, helped to drive a 7.4% increase in TrevPAR, to €401.21.
Profit & Loss Key Performance Indicators – Paris (in EUR)
May 2018 v May 2017
RevPAR: +7.5% to €265.16
TrevPAR: +7.4% to €401.21
Payroll: +0.4 pts to 47.3%
GOPPAR: +12.0% to €84.89
Despite the 0.4-percentage point increase in Payroll levels, to 47.3% of total revenue, profit per room at hotels in Paris increased by 12.0% year-on-year in May, to €84.89.
And whilst profit levels remain well below those achieved prior to the terrorism attacks in the French capital in November 2015, GOPPAR has grown by almost €17 over the last year, to €86.81 in the 12 months to May 2018, from €70.29 during the same period in 2016/2017.
UK
Profit per room at hotels in the UK fell by 4.3% in May as year-on-year declines were recorded across all departments; meanwhile, owners and operators continue to face the challenge of rising costs.
In addition to a drop in Rooms Revenue (-1.2%), the -1.3% decline in Total Revenue at hotels in the UK this month was due to falling revenues in Non-Rooms departments, including Food & Beverage (-2.0%), Conference & Banqueting (-3.5%) and Leisure (-1.7%) on a per available room basis.
The 1.2% decline in RevPAR this month was not only as a result of a 0.2-percentage point year-on-year drop in room occupancy, to 80.5%, but UK hotels also suffered an uncharacteristic drop in achieved average room rate, which fell by 0.9%, to £115.90.
This is only the second time since October 2016 that a decline in rate has been recorded, as the ability to leverage price has been a mainstay for UK hoteliers on the back of punchy room occupancy levels. The first drop was during the debilitating weather conditions in March 2018.
And whilst the commercial sector remained robust this month, declines in achieved average room rate were recorded in the Individual Leisure (-2.9%) and Group Leisure (-4.8%) segments, which was in spite of the spike in leisure-related demand generated by the two Bank Holiday weekends and a range of internationally significant events, including the Royal Wedding.
The declining revenue levels were further hit by rising costs, which this month included a +0.7-percentage point increase in Payroll to 27.7% of total revenue, as well as a +0.3-percentage point increase in Overheads, which grew to 21.4% of total revenue.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
May 2018 v May 2017
RevPAR: -1.2% to £93.30
TrevPAR: -1.3% to £142.82
Payroll: +0.7 pts to 27.7%
GOPPAR: -4.3% to £55.48
The falling revenue levels and rising costs meant profit per room fell by -4.3% this month, to £55.48 and contributed to the -4.0% drop in GOPPAR at UK hotels for year-to-date 2018.
“As this is only the second time there has been a decline in TrevPAR in the last 20 months, it is probably more of a blip in performance than a sea of change.
However, with an additional six days of school holidays due to the two Bank Holiday weekends and May half-term, the UK hotel market was undoubtedly more reliant on the leisure sector this month, which has not performed.
Whilst both London Heathrow and London Gatwick airports reported handling record passenger numbers in May, it is possible that the poor weather earlier in the year led to there being a higher number of departures than arrivals,” said Pablo Alonso, CEO of HotStats.
In contrast to the overall performance of hotels across the UK, properties in Leeds recorded one of their strongest months of year-on-year growth in recent years this month as the city hosted the final stage of the Tour de Yorkshire.
Due to the uplift in demand levels, room occupancy at hotels in Leeds soared by +6.5-percentage point year-on-year, to 79.1% which was complemented by a 1.5% increase in achieved average room rate, to £80.59.
The combination of growth in volume and price pushed RevPAR to £63.74, which is a high in the Leeds market in the five months to May 2018 and well above the year-to-date average of £56.32.
“The Tour de Yorkshire is a spin off event which was created after the region successfully hosted the Grand Depart for the 2014 Tour de France. The number of spectators to the event now exceeds more than two million people which not only positively impacts the local economy, but is a coup for hoteliers on the route,” added Pablo.
In addition to the growth in Rooms Revenue, hotels in Leeds were able to drive an increase in Non-Rooms Revenue in May, which included a year-on-year uplift in Food and Beverage Revenue (+10.1%), as well as Conference and Banqueting Revenue (+13.9%), on a per available room basis. As a result, TrevPAR at hotels in Leeds increased by 9.8% year-on-year to, £109.08.
Profit & Loss Key Performance Indicators – Leeds (in GBP)
May 2018 v May 2017
RevPAR: +10.6% to £63.74
TrevPAR: +9.8% to £109.08
Payroll: -2.8 pts to 29.8%
GOPPAR: +21.4% to £36.62
In addition to the growth in revenue, hotels in Leeds were able to record a -2.8-percentage point saving in Payroll, which fell to 29.8% of total revenue.
The movement in revenue and costs enabled profit per room at hotels in Leeds to surge by 21.4%, to £36.62 and provided a more positive profit outlook to what has been a fairly dismal start to the year for hotels in the Yorkshire city.
One year on from the Manchester Arena bombing, hotel performance in the ‘Capital of the North’ was much more subdued.
The reduction in demand from the commercial segment in May, which is key to Manchester hoteliers, meant that declines were recorded in both room occupancy (-2.8-percentage points) and achieved average room rate (-1.4%). Whilst RevPAR for hotels in Manchester dropped by -4.6% to £80.71, this represented a peak in performance in this measure for year-to-date 2018.
Further declines in Non-Rooms revenues meant that TrevPAR at hotels in Manchester dropped by -5.2% in May, to £124.41.
Profit & Loss Key Performance Indicators – Manchester (in GBP)
May 2018 v May 2017
RevPAR: -4.8% to £80.71
TrevPAR: -5.2% to £124.41
Payroll: +1.4 pts to 26.5%
GOPPAR: -12.7% to £44.56
Alongside the decline in revenue, rising costs meant that hotels in Manchester recorded a -12.7% drop in profit per room in May, to £44.56. The decrease this month contributed to the -2.0% decline in GOPPAR for year-to-date 2018.
USA
Hotels in the USA recorded a fourth consecutive month of year-on-year profit growth in May as a result of ongoing robust increases in revenue and in spite of rising costs.
Year-on-year growth in profit per room at hotels in the USA was recorded at +1.6-percent this month, to $109.89. This was a slowing from previous months, but helped maintain the upward trajectory in GOPPAR, which has now increased by +8.0-percent over the last 24 months, to $95.57 in the 12 months to May 2018.
The growth this month was led by a +1.3-percent increase in TrevPAR, which was as a result of year-on-year growth across all revenue centers, including Rooms Revenue (+1.1-percent); and Non-Rooms revenues, including Food & Beverage (+1.1-percent) and Conference & Banqueting (+2.9-percent) on a per available room basis.
The growth in Rooms Revenue this month was entirely due to a +2.0-percent increase in achieved average room rate, which grew to $211.68, and was in spite of a -0.7-percentage point decline in room occupancy, which dropped to 79.5-percent.
At $168.35, RevPAR at hotels in the USA this month was well behind the punchy performance recorded in March ($180.07) and April ($179.32) as demand slowed from the recent peaks.
Profit & Loss Key Performance Indicators – USA (in USD)
May 2018 v May 2017
RevPAR: +1.1% to $168.35
TrevPAR: +1.3% to $272.79
Payroll: +0.6 pts to 34.1%
GOPPAR: +1.6% to $109.89
Despite the growth in top line performance, hotels in the USA recorded a +0.6-percentage point increase in Labor costs, which grew to 34.1-percent of total revenue.
As a result of the movement in revenue and costs, flow through at hotels in the USA in May was recorded at 51.9-percent, which is reasonable considering the lacklustre TrevPAR increase.
And despite the limited increase this month, year-to-date growth in bottom line performance at hotels in the USA remained steady at +3.4-percent for the five months to May 2018, to $103.93.
“Further to the record breaking revenue performance in March and April, the USA hotel market is now heading into the slower summer period, as commercial activity lessens.
However, the story remains positive as May was not only the fourth consecutive month of profit growth, but it would have been the eighth month in a row in which hotels had recorded an increase in GOPPAR were it not for the slight slip in January,” said Pablo Alonso, CEO of HotStats.
In line with the growth across the USA, hotels in New York City have recorded consistent increases in profit per room in 2018, which were punctuated by a +4.5-percent year-on-year increase this month, to $168.72 per available room.
The +6.2-percent increase in profit per room for year-to-date 2018 is further to the buoyant performance in 2017, during which hotels in the city recorded a +2.8-percent increase in GOPPAR. This was in spite of the addition of more than 5,000 bedrooms to hotel supply.
The growth in profit per room at hotels in New York City this month was driven by increases across all revenue departments, but led by a +2.7-percent increase in RevPAR, as hoteliers continue to drive growth in both room occupancy (+1.3-percentage points), to a heady 90.2-percent, as well as achieved average room rate, which increased by +1.3-percent year-on-year, to $348.60.
Whilst hotels in New York continue to drive increases in achieved average room rate, more recently the growth in this measure has been led by the leisure segment, as commercial rates in the city continue to come under pressure, illustrated by the drop in rate recorded in the Residential Conference (-2.0-percent) and Corporate (-5.0-percent) segments for year-to-date 2018.
Nevertheless, as a result of growth in the Rooms department, as well as increases in Non-Rooms Revenues, including Food & Beverage (+7.5-percent) and Conference & Banqueting (+10.0-percent) on a per available room basis, TrevPAR at hotels in New York City increased by +4.8-percent this month, to $460.88.
Profit & Loss Key Performance Indicators – New York City (in USD)
May 2018 v May 2017
RevPAR: +2.7% to $314.27
TrevPAR: +4.8% to $460.88
Payroll: +0.7 pts to 43.0%
GOPPAR: +4.5% to $168.72
In spite of the robust revenue growth, profit levels at hotels in New York City continue to be challenged by high Labor costs, which were recorded at 43.0-percent of total revenue this month, which is approximately +9.0-percentage points above the national average.
As a result of the +0.7-percentage point increase in Labor costs, profit conversion at hotels in New York City dropped by -0.1-percentage points, to 36.6-percent of total revenue in May. And with a flow through of just 34.6-percent this month, it is clear that market conditions are impacting the ability of hoteliers in the Big Apple to convert the growth in top line to bottom line increases.
In contrast to the growth in New York City and the USA overall, hotels in Boston suffered a -1.9-percent drop in profit per room this month, to $174.84, although profit conversion remained punchy at 46.8-percent of total revenue.
Further to the mixed profit performance in 2016 (-0.5-percent) and 2017 (+1.2-percent), hotels in Boston once again find themselves under pressure from additions to supply, with hotels in the Massachusetts capital city recording a -14.1-percent year-on-year decline in profit in the five months to May 2018.
“Having historically been a market with high barriers to entry, it seems that the flood gates to the Boston hotel market have now opened with the addition of 700 bedrooms in 2017 and a further 1,100 rooms scheduled to open on 2018.
The data would suggest that new supply began to impact Boston hotel performance in late 2017, with profit hit hard since the beginning of 2018,” added Pablo.
The 1.0-percent increase in total revenue at hotels in Boston in May, to $373.28, was fuelled by increases in Non-Rooms Revenues, which offset the 2.6-percent year-on-year drop in Rooms Revenue, to $265.13.
Profit & Loss Key Performance Indicators – Boston (in USD)
May 2018 v May 2017
RevPAR: -2.6% to $265.13
TrevPAR: +1.0% to $373.28
Payroll: +1.6 pts to 30.4%
GOPPAR: -1.9% to $174.84
Glossary:
Occupancy (%) – Is that proportion of the bedrooms available during the period which are occupied during the period.
Average Room Rate (ARR) – Is the total bedroom revenue for the period divided by the total bedrooms occupied during the period.
Room Revpar (RevPAR) – Is the total bedroom revenue for the period divided by the total available rooms during the period.
Total Revpar (TRevPAR) – Is the combined total of all revenues divided by the total available rooms during the period.
Payroll % – Is the payroll for all hotels in the sample as a percentage of total revenue.
GOPPAR – Is the Total Gross Operating Profit for the period divided by the total available rooms during the period.
