In 1973, English rock band Led Zeppelin was filmed over three days of concerts at Madison Square Garden in New York. The footage was released three years later under the title: “The Song Remains the Same.”
NB: This is an article from Hotstats
The film was promoted as the first time the world had a front row seat to the legendary band. Unfortunately, as the hotel industry continues to labor through COVID-19 and its impact, the emerging trend mirrors the Zeppelin title: “The Story Remains the Same.”
A front row seat to a fright show.
As the second quarter of 2020 closed, global regions continued to struggle with the effects of the coronavirus, with some areas jumping the gun on reopening (others better) and worry over further spikes that could thwart the hotel industry’s ability to get back to some semblance of normalcy.
U.S. Relapse
Globally, anemic occupancy continues to choke off revenue and profitability. In the U.S., which continues to lead in global cases and deaths, RevPAR in June was down 87.3% year-over-year, but hoteliers could take solace that the metric was 67% higher than it was in May.
Unfortunately, the same could not be said for profit. GOPPAR in the month was down 118% YOY and a gain in the metric from April to May was short-lived, sliding back, down 14% in June over the prior month.
Conversely, total revenue per available room (TRevPAR) saw an uptick in June over May, up 67%, but still down 87.9% YOY.
The month-over-month decline in profit is a function of an uptick in expenses. Total overhead costs were down YOY, like most costs, but bounced up in June over May, climbing 53%. Concurrently, labor costs bounded upward MOM, up 39%. While the expense line jumped, it’s not an altogether ominous sign for the hotel industry, illustrating that some jobs are either being filled or brought back as more hotels reopen.
Second-quarter GOPPAR was down 119% compared to the same period in 2019. Year-to-date GOPPAR is down 85% over the same period in 2019.
Profit & Loss Performance Indicators — U.S. (in USD)
| KPI | June 2020 v. June 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -87.3% to $23.10 | -59.1% to $71.02 |
| TRevPAR | -87.9% to $33.87 | -58.1% to $115.11 |
| Payroll PAR | -62.7% to $35.20 | -37.9% to $59.91 |
| GOPPAR | -118.2% to -$20.11 | -85.2% to $15.43 |
Asia-Pacific Promise
If there is one region to look at for hospitality hope, it’s Asia-Pacific. Out of all the regions HotStats tracks, it’s the only one to have turned in positive GOPPAR in June. At $3.58, it’s small, but any positivity is grounds for applause. It’s the first time the metric has turned positive since February, when COVID-19 made its might first known.
Helping fuel the growth was an occupancy rate that climbed to 32.2% for the month, 2.2 percentage points higher than in February. The 5.6-percentage-point jump in June occupancy over May still did not lead to any pricing power, with hoteliers content to try and fan RevPAR by volume rather than rate.
The trouble is, it has the potential to be ephemeral.
Some countries in Asia-Pacific are experiencing sharp climbs in new cases of COVID-19, including India, which became the third country to record more than 1 million cumulative cases, while Indonesia overtook China as the country with the highest number of confirmed cases in East Asia.
Other countries, including Australia and Japan, appear to be experiencing a second wave of infections.
All bad signs for what now can be considered a fledgling hotel industry.
June, however, showed hope, with many key metrics up on a monthly basis, including RevPAR (up 22.7%) and TRevPAR (up 31.4%). In another show of confidence, total revenue from F&B was up 42.2%, an indication that guests aren’t just making their way back to hotels for sleep, but to eat.
Second-quarter GOPPAR was down 108.4% over the same period last year.
Profit & Loss Performance Indicators — Asia-Pacific (in USD)
| KPI | June 2020 v. June 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -68.5% to $27.70 | -61.8% to $35.89 |
| TRevPAR | -65.8% to $53.29 | -59.9% to $64.90 |
| Payroll PAR | -51.7% to $22.62 | -35.3% to $30.49 |
| GOPPAR | -92.8% to $3.58 | -93.8% to $3.41 |
Europe’s Complication
In Europe, which has had relative success containing the spread of COVID-19—though new worry has emerged—hotel performance hasn’t matched, as travel demand remains spotty, resulting in double-digit declines for most key performance metrics in June.
With the summer season now in full swing, many European countries are dependent on the traveler spend that arrives with it. However, the EU bloc’s ban of certain countries, including the U.S., makes that reliance difficult.
RevPAR in the region was down 94.6% YOY, with average rates below €100 coupled with sub-10% occupancy rates.
Choked off ancillary revenue streams resulted in a 92% YOY decline in TRevPAR in June; on an optimistic note, it was up 57% on May, the potential result of many countries thawing out their economies. Contrary to the U.S., Europe saw MOM gains in profit, with GOPPAR still in negative territory, but up 20% over May. YOY GOPPAR is down 115% YOY.
Total overhead costs were up 8% MOM and labor costs saw a minimal jump.
GOPPAR in the second quarter was down 122% over the same period in 2019.
Profit & Loss Performance Indicators — Europe (in EUR)
| KPI | June 2020 v. June 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -94.6% to €10.01 | -63.2% to €41.77 |
| TRevPAR | -91.6% to €18.57 | -60.5% to €67.03 |
| Payroll PAR | -69.2% to €17.90 | -38.4% to €33.70 |
| GOPPAR | -114.7% to -€14.27 | -96.1% to €2.24 |
Middle East Turns South
The Middle East did not have the same luck as Asia-Pacific, trending closer to the U.S. and Europe.
While occupancy was higher than both the U.S. and Europe in June, it gave back 2 percentage points from May. However, average rate did see nominal growth over the same period, resulting in a small 2.3% uptick in RevPAR.
Like RevPAR, TRevPAR saw a slight increase in June over May, up 5.3%, but off 55% from March. The small rise in total revenue was bolstered by an uptick in total F&B revenue, which climbed to a double-digit dollar amount, the first time it’s been in that territory also since March.
On a gloomier note for hotel owners, profitability did not follow suit. Like the U.S., GOPPAR was down on a MOM basis in June, declining 43% over May. It’s a striking figure since GOPPAR had been trending in the right direction since it first plummeted into negative territory in April at $-15.56. May saw GOPPAR rise, but June’s $-18.27 figure was the lowest ever recorded in a month in the region by HotStats. It was also down 140.6% YOY.
An increase in expenses helped erase revenue gains. Total overheads on a per-available-room basis were up 16.7% MOM, as were labor costs, up 8.7%.
Like other regions, the Middle East is seeing surges of its own, prompting some countries to turn again to lockdowns. A full lockdown will be imposed across Iraq during the Eid Al-Adha holiday, which runs from July 31 to August 3. The holy festival is the second of two Islamic holidays celebrated each year. The first, Eid Al-Fitr, which runs for two days in May, was blamed for a surge in cases after restrictions were relaxed.
GOPPAR in the second quarter was down 123.2% over the same period in 2019.
Profit & Loss Performance Indicators — Middle East (in USD)
| KPI | June 2020 v. June 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -75.6% to $23.42 | -50.5% to $59.11 |
| TRevPAR | -77.7% to $37.93 | -51.5% to $100.43 |
| Payroll PAR | -46.5% to $30.81 | -31.2% to $40.27 |
| GOPPAR | -140.6% to -$18.27 | -74.9% to $19.06 |
Conclusion
All hoping for a V-shaped recovery in the hotel sector can now see that the succeeding months will be choppy at best. Perhaps no industry is impacted or shaped more by external forces than the hotel industry, which lives and dies on the free movement of people. When that movement is impeded, courtesy of COVID-19, demand sharply recedes, leaving a black stain on hotel revenue and profit.
Until the traveling public is fully confident again, which may not come until a vaccine is produced (which has hurdles of its own) or, absent that, a precipitous fall in cases, the hotel industry could be stuck in a rut and will have to rely on savvy to safeguard the bottom line.
