MIDDLE EAST & AFRICA
The positive start to the year for hotels in the Middle East & Africa was short lived as profit per room fell by 7.8% in February, led by a significant year-on-year decline in achieved average room rate, according to the latest worldwide poll of full-service hotels from HotStats.
Profit per room at hotels in the Middle East & Africa fell to $82.38 this month, which completely cancelled out the positive performance in January and led to hotels in the region recording a 1.2% decline in GOPPAR for year-to-date 2018, to $85.12.
The drop in profit at hotels in the Middle East & Africa was as a result of a decline in revenue as well as rising costs. In addition to a 6.8% decrease in revenue in the Rooms department, declines in Non-Rooms revenues, including Food and Beverage (-3.6%) and Conference & Banqueting (-4.2%), contributed to the 4.6% decline in TrevPAR, to $210.95.
Whilst hotels in the Middle East & Africa recorded a 1.4-percentage point year-on-year increase in room occupancy in February, to 70.7%, this was completely wiped out by an 8.7% drop in achieved average room rate, to $171.49.
The challenges in achieved average room rate for hotels in the region are clear, with a fall in rate recorded across all segments in February, with the greatest margin of decline recorded in the Best Available Rate (-13.4%), Residential Conference (-10.4%), Corporate (-11.2%) and Group Leisure (-7.8%) segments.
Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)
February 2018 v February 2017
RevPAR: -6.8% to $121.20
TrevPAR: -4.6% to $210.95
Payroll: +1.1 pts to 27.6%
GOPPAR: -7.8% to $82.38
In addition to the drop in TrevPAR, profit levels at hotels in the Middle East & Africa were hit by a further 1.1-percentage point increase in Payroll, to 27.6% of total revenue.
As a result of the movement in revenue and costs, profit conversion at hotels in the region was recorded at 39.1%, which, despite being 0.9 percentage points below the same period in 2017, was above the profit conversion for hotels in the Middle East & Africa in the 12 months to February 2018 at 37.4% of total revenue.
The Jeddah hotel market was amongst the poorest performing in February, recording a 39.7% decline in profit per room on the back of a drop in revenue and rising costs.
The 16.8% decline in TrevPAR at hotels in Jeddah was as a result of falling revenue levels across all departments, including Food and Beverage (-15.2%), Conference and Banqueting (-13.9%) and Leisure (-26.2%).
The 17.2% year-on-year decline in Rooms Revenue at hotels in the Saudi city was as a result of the ongoing decline in room occupancy levels, which were recorded at -4.9 percentage points this month, to 57.2%, as well as a 10.1% drop in achieved average room rate, to $214.54.
Room occupancy levels at hotels in Jeddah in particular are under pressure from additions to supply, which over the last 18 months have included the 304-bedroom Rocco Forte Assila Hotel, 224-bedroom Ritz Carlton, 252-bedroom Centro Shaheen by Rotana, 129-bedroom Citadines Al Salamah, 228-bedroom Movenpick City Star and 142-bedroom Radisson Blu Al Samalah.
As a result, room occupancy levels at hotels in Jeddah have plummeted by 12.1-percentage points over the last 36 months, to 66.8% in the 12 months to February 2018, from 78.9% in the 12 months to March 2015.
Profit & Loss Key Performance Indicators – Jeddah (in USD)
February 2018 v February 2017
RevPAR: -17.2% to $122.68
TrevPAR: -16.8% to $212.15
Payroll: +8.1 pts to 40.8%
GOPPAR: -39.7% to $55.23
In addition to the drop in revenues, rising costs, which included an 8.1-percentage point increase in Payroll to 40.8% of total revenue, led to profit conversion at hotels in Jeddah falling to just 26% of total revenue.
“The Jeddah hotel market is facing several critical issues. In addition to plummeting room occupancy levels, additions to supply have increased the competitiveness of the market and put pressure on lesser quality assets. As a result, this has forced several hotels out of the market, which has included the Sofitel being downgraded to a Pullman and then debadged completely.
There is also a flight to value from the domestic corporate and leisure market, which is impacting top line performance.
Furthermore, changes to labour legislation, which has included an increase in the expat levy, has had a significant impact on payroll costs and subsequently profit levels at hotels in Jeddah. These are all issues which are unlikely to improve anytime soon,” said Pablo Alonso, CEO of HotStats.
In contrast to the performance across the Middle East & Africa, hotels in Kuwait City recorded a 50.1% increase in profit per room in February to $160.04, which marked a fourth consecutive month of year-on-year profit growth for hotels in the Kuwait capital.
The growth in GOPPAR at hotels in Kuwait City was led by a 25.2% increase in TrevPAR, to $310.26, which was primarily due to a 29.7% increase in RevPAR, to $169.79.
Profit & Loss Key Performance Indicators – Kuwait City (in USD)
February 2018 v February 2017
RevPAR: +29.7% to $169.79
TrevPAR: +25.2% to $310.26
Payroll: -3.4 pts to 24.1%
GOPPAR: +50.1% to $160.04
For hotels in Kuwait, the 29.7% increase in RevPAR this month was driven by an 8.3-percentage point increase in room occupancy, to 67.3%, as well as a 13.8% increase in achieved average room rate, to $251.49.
The 38.9% year-to-date increase in profit per room at hotels in Kuwait City represents a change in fortunes since the beginning of 2018 and is further to GOPPAR declines in 2016 (-14.6%) and 2017 (-1.9%).
EUROPE
Hotels in Europe maintained their strong start to the year by recording an 8.3% year-on-year increase in profit per room in February as growth was recorded across all revenue departments and was supported by cost savings.
GOPPAR at hotels in Europe surged to €31.30 this month, which represented a tenth consecutive month of profit growth for hotels in the region, signalling a truly positive period of trading for properties in the region.
The growth this month contributed to hotels in Europe recording a profit per room of €59.17 in the rolling 12 months to February 2018, which is 8.3% above the same period in 2016/17.
The growth in profit per room this month was driven by increases across all revenue departments as hotels in Europe successfully recorded a 3.2% year-on-year increase in TrevPAR, to €141.52, which was due to an increase in Rooms (+4.3%), Food and Beverage (+1.7%) and Conference and Banqueting (+2.3%) revenue on a per available room basis.
In line with the performance over the last 12 months, the growth in Rooms Revenue at hotels in Europe in February was driven by achieved average room rate, which increased by 3.4%, to €143.11, and was in addition to a 0.6-percentage point increase in room occupancy, to 62.8%.
Growth in headline performance levels this month were once again driven by the broad base of demand in the region, but were weighted towards the commercial sector as notable rate increases were recorded in the Residential Conference (+6.4%) and Corporate (+8.1%) segments, with a more limited rate increase in the Individual Leisure (+0.8%) segment.
Profit & Loss Key Performance Indicators – Europe (in EUR)
February 2018 v February 2017
RevPAR: +4.3% to €89.87
TrevPAR: +3.2% to €141.52
Payroll: -0.3 pts to 41.7%
GOPPAR: +8.3% to €31.30
The growth in revenue levels was supplemented by cost savings, which were led by a 0.3-percentage point reduction in Payroll, to 41.7% of total revenue.
The cost savings enabled hotels in Europe to increase further their efficiency and record a profit conversion of 22.1% of total revenue in February, an increase of 1.0-percentage points from same period in 2017, at 21.1% of total revenue.
Hotels in Madrid were amongst the top performing in February, recording a 24.1% year-on-year increase in profit per room for the month, to €38.79, on the back of an increase in revenues and a reduction in costs.
Top line growth at hotels in the Spanish capital was driven by an 8.4% increase in RevPAR as hotels in Madrid successfully recorded a 1.1-percentage point increase in room occupancy, to 69.2%, in addition to a 6.7% increase in achieved average room rate, to €150.70.
The increase in rate at hotels in Madrid in February was primarily due to growth in the commercial sector, which included an increase in the Corporate (+33.9%) and Residential Conference (+18.2%) segments.
Growth at hotels in Madrid, was also recorded in Non-Rooms departments, including Food and Beverage (+7.0%) and Conference and Banqueting (+9.4%), which contributed to the 7.3% increase in TrevPAR for the month, to €155.86.
Profit & Loss Key Performance Indicators – Madrid (in EUR)
February 2018 v February 2017
RevPAR: +8.4% to €104.22
TrevPAR: +7.3% to €155.86
Payroll: -0.6 pts to 43.6%
GOPPAR: +24.1% to €38.79
As well as the increase in revenue, hotels in Madrid successfully slashed costs, which included a 0.6-percentage point decrease in Payroll, to 43.6% of total revenue.
The growth in GOPPAR this month contributed to the 33.6% year-to-date increase in profit per room for hotels in Madrid and means hotels in the Spanish capital are already set to add another year of profit growth after consecutive increases in 2016 (+3.3%) and 2017 (+16.7%).
“The growth in top and bottom line performance for hotels in Madrid over the last couple of years has been supported by the elevated tourism profile of the city, which has contributed to Spain attracting a record number of visitors in 2017, to approximately 82 million. This has been in spite of anti-tourism protests across the country.
In addition, demand to hotels in Madrid in February was driven by the EAHAD medical congress, as the city remains a popular destination for business tourism,” said Pablo Alonso, CEO of HotStats.
In contrast, hotels in Munich suffered a 36.4% decline in profit per room this month, as headline performance levels plummeted due to a reduction in conference-related demand.
In particular, the Munich Security Conference, which attracted more than 680 participants in February 2017 was a much smaller event in 2018. And, despite accommodating a number of high-profile visitors and their entourage, including heads of state, government leaders, representatives of international organisations and top business leaders, the impact on local hotels was significantly lessened.
With the reduced demand from the conference sector, hotels in Munich suffered an 18.8% decline in RevPAR, which was due to a 13.0-percentage point year-on-year drop in room occupancy, to 64.7%, as well as a 2.6% decline in achieved average room rate, to €148.85.
A decline in Non-Rooms Revenues at hotels in Munich this month, illustrated by the 10.1% year-on-year drop in Food and Beverage Revenue on a per available room basis, contributed to a 16.4% decrease in TrevPAR, to €138.70.
Additional cost increases were also recorded in Overheads, which grew by 4.4-percentage points year-on-year, to 27.6% of total revenue.
As a result of the movement in revenue and costs, GOPPAR at hotels in Munich fell to €36.49 in February, which was equivalent to a profit conversion of 26.3% of total revenue. The decline in profit this month contributed to the year-to-date profit drop of 28.1% at hotels in Munich.
Profit & Loss Key Performance Indicators – Munich (in EUR)
February 2018 v February 2017
RevPAR: -18.8% to €96.36
TrevPAR: -16.4% to €138.70
Payroll: +4.6 pts to 39.1%
GOPPAR: -36.4% to €36.49
UK
Despite recording an increase in revenue across a number of departments, year-on-year profit per room at hotels in the UK fell by 5.1% in February as cost increases continue to accelerate.
Hotels in the UK successfully recorded a 0.2% year-on-year increase in TrevPAR this month, to £122.64, which was due to increases across all revenue departments, including Rooms (+0.4%), Food and Beverage (+0.2%) and Conference and Banqueting (+3.6%).
The growth in Rooms Revenue at hotels in the UK in February was driven by a 1.3% increase in achieved average room rate, to £106.70, and was in spite of a 0.6-percentage point decline in room occupancy, to 73.0%, as volume struggles to grow beyond the current record levels.
Whilst the growth in top line revenue was subdued, it was entirely wiped out by escalating costs, which included a 1.0-percentage point increase in Payroll to 32.5% of total revenue.
Additional cost increases were also recorded in Overheads, which grew by 0.9-percentage points year-on-year, to 26.3% of total revenue, which was largely due to a 7.1% increase in Utility costs, up to £5.55 on a per available room basis.
As a result of the movement in revenue and costs, GOPPAR at hotels in the UK fell by 4.8% year-on-year to £36.65 in February. This was equivalent to a profit conversion of 29.9% of total revenue.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
February 2018 v February 2017
RevPAR: +0.4% to £77.85
TrevPAR: +0.3% to £122.64
Payroll: + 1.0 pts to 32.5%
GOPPAR: -4.8% to £36.65
Payroll increases are putting pressure on profitability throughout the hotel P&L. This is no better illustrated than in the Rooms Department, which suffered a 0.5-percentage point decline in Rooms profit conversion, to 69.9% of Rooms Revenue. This was primarily as a result of a 0.5-percentage point uplift in Rooms Payroll, to 15.5%, as well as a 0.1-percentage point increase in Rooms Expenses, to 6.6% of Rooms Revenue.
“It’s been a tough start to 2018 for hotels in the UK. After several years of consistent growth, the upward trajectory has stalled somewhat, which seems to be as a result of occupancy levels hitting a ceiling.
Now may be the perfect time for hoteliers to consider an alternative strategy, which focuses on searching for opportunities to increase Non-Rooms Revenues, as well as preserving profit levels by reducing costs. This is, of course, easier said than done,” said Pablo Alonso, CEO of HotStats.
In line with the total UK, hotels in the Heathrow Airport market suffered a decline in profit per room. This was not only due to rising costs, but top line performance was hit by the changeable weather conditions in February, which meant flights were cancelled on more than one occasion during the month.
As a result, TrevPAR at hotels at Heathrow fell by 5.3% year-on-year, to £79.77, which was due to plummeting Rooms (-4.6%), Food and Beverage (-9.4%) and Conference and Banqueting (-5.2%) revenue, on a per available room basis.
The drop in Rooms revenue levels at hotels at Heathrow Airport was led by a 3.2-percentage point decline in room occupancy, to 73.0%, coupled with a 0.4% decline in achieved average room rate, to £74.78.
“Heathrow airport is prone to flight cancellations during poor weather conditions, such as snow, ice or fog, and this can sometimes lead to a spike in local hotel performance if passengers are stranded in the area.
However, the prolonged period of snowfall in February, which included a battering by the ‘Beast from the East’ meant people just did not travel unless it was essential, leading to a drop in demand and consequent decline in profit levels,” added Pablo.
Hotels at Heathrow also recorded a 2.5-percentage point increase in Overheads, to 28.8% of total revenue, with Utility expenses soaring by 23.1% year-on-year, to £4.64 per available room.
As a result of the movement in revenue and costs, GOPPAR at hotels at Heathrow Airport fell by 8.9%, to £23.29, which contributed to the 12.9% drop in this measure so far in 2018 and marked a poor start to the year for hotels in the area.
Profit & Loss Key Performance Indicators – Heathrow Airport (in GBP)
February 2018 v February 2017
RevPAR: -4.6% to £54.58
TrevPAR: -5.3% to £79.77
Payroll: +0.9 pts to 32.3%
GOPPAR: -8.9% to £23.29
Hotels around Manchester Airport were no better off, with delays and flight cancellations leading to a drop in both top and bottom line performance levels in February.
Whilst hotels at Manchester Airport were able to record a 2.6% increase in achieved average room rate this month, to £85.21, this was more than cancelled out by the 4.8-percentage point decline in room occupancy, albeit to a still very punchy 84.8%. As a result, RevPAR fell by 2.9%, to £72.26.
In addition to the drop in RevPAR, Non-Rooms Revenues at hotels at Manchester Airport fell, and contributed to the 1.9% decline in TrevPAR, to £111.74.
The falling revenue levels at Manchester Airport hotels were further exacerbated by increasing costs, which included a 1.4-percentage point increase in Payroll to 27.8% of total revenue.
The escalating costs, on top of declining revenues meant profit per room for hotels at Manchester Airport fell by 1.8% to £38.37 in February, equivalent to 34.3% of total revenue.
Despite the challenges this month, demand levels at Manchester Airport are strong, led by an 8.5% year-on-year increase in passenger numbers in 2017, to 27.8 million. As a result, more than 1,000 bedrooms are mooted for development in the local market in the next few years, led by a £100 million Hampton by Hilton/Hilton Garden Inn scheme, which could add 629-bedrooms in to the local market.
Profit & Loss Key Performance Indicators – Manchester Airport (in GBP)
February 2018 v February 2017
RevPAR: -2.9% to £72.26
TrevPAR: -1.9% to £111.74
Payroll: +1.4 pts to 27.8%
GOPPAR: -1.8% to £38.37
USA
After a somewhat shaky start to the year, hotels in the USA recorded a robust 4.4-percent increase in profit per room in February, which was fuelled by year-on-year growth in revenue from the leisure segment.
The punchy increase in profit per room recorded at hotels in the USA this month, which grew to $95.99, was equivalent to a profit conversion of 36.8-percent of total revenue; and was driven by a 3.6-percent year-on-year increase in TrevPAR, to $261.04.
Increases across Non-Rooms departments in February contributed to the growth in TrevPAR and included an uplift in Food & Beverage Revenue (+5.4-percent), as well as Conference & Banqueting Revenue (+6.9-percent) on a per available room basis.
The growth in Total Revenue this month was also supported by a robust increase in Rooms Revenue, which was as a result of an uplift in room occupancy (+0.5-percentage points), to 75.3-percent, as well as achieved average room rate (+1.3-percent), to $207.81, which helped fuel a 1.9-percent increase in RevPAR, to $156.42.
Top-line growth at hotels in the USA was as a result of rate growth in both the Individual Leisure (+3.2-percent) and Group Leisure (+3.6-percent) segments this month, which was in contrast to the decline in achieved average rate in the Residential Conference (-1.3-percent) and Corporate (-2.4-percent) segments.
Profit & Loss Key Performance Indicators – USA (in USD)
February 2018 v February 2017
RevPAR: +1.9% to $156.42
TrevPAR: +3.6% to $261.04
Payroll: +0.0 pts to 35.7%
GOPPAR: +4.4% to $95.99
“The widely anticipated ‘Trump Slump’, so called because the number of overseas visitors travelling to the US was expected to decline in line with President Trump taking office and the implementation of travel bans and increased security protocols, appears to either not have materialised or not been as severe as feared.
Either way, it is having little impact on the ability of hotels in the USA to capture demand from the leisure segment, which is great news for hotel investors and operators who will welcome a broadening of the demand based,” said Pablo Alonso, CEO of HotStats.
Whilst Labor costs remained relatively flat across the operation this month, at 35.7-percent of total revenue, the uplift in Payroll presented challenges in specific departments, which included the Rooms Department.
Despite the growth in RevPAR, profit conversion in the Rooms Department fell by 0.4-percentage points to 73.6-percent of Rooms Revenue, as a result of incremental increases in departmental Payroll levels, which grew to 16.7-percent of Rooms Revenue in February.
In contrast to the positive performance of hotels across the USA this month, profit per room at properties in Boston fell by 54.8-percent, to just $14.96, as a result of declining revenues across all departments.
The decline in RevPAR at hotels in Boston was as a result of a fall in room occupancy, which dropped by 1.6-percentage points, to 69.8-percent, as well as a 2.1-percent decline in achieved average room rate, to $179.93.
In addition to the drop in Rooms Revenue, falling Non-Rooms Revenues included a decline in Food & Beverage Revenue (-18.4-percent), as well as Conference & Banqueting Revenue (-21.5-percent) on a per available room basis, which contributed to the 8.1-percent year-on-year decline in TrevPAR at hotels in Boston in February, to $180.60.
Profit & Loss Key Performance Indicators – Boston (in USD)
February 2018 v February 2017
RevPAR: -4.2% to $125.66
TrevPAR: -8.1% to $180.60
Payroll: +6.6 pts to 55.4%
GOPPAR: -54.8% to $14.96
The decline in revenue levels further exacerbated the increase in Labor costs at hotels in Boston, which increased by 6.6-percentage points to 55.4-percent of total revenue.
As a result of the movement in revenue and costs, profit conversion at hotels in Boston fell to just 8.3-percent of total revenue.
“The Boston hotel market is in the middle of a building boom, which included the addition of approximately 1,500 bedrooms in 2016 and a further 700 bedrooms in 2017.
Key openings are testing the market in terms of volume as well as price, which is primarily due to their positioning in the mid-market and ‘affordable luxury’ segments, including properties operating under the Aloft, AC by Marriott, Hilton Garden Inn and Yotel brands.
A further 4,500 bedrooms are in the hotel development pipeline in Boston and due to open in the next few years, which is likely to mean there is some pain to come for the capital of Massachusetts,” added Pablo.
Much further south, February is typically a peak period of performance at hotels in Phoenix due to the climate and this month was no different, with TrevPAR climbing by 1.5-percent to $382.05, which is more than 40-percent above the 12-month rolling average for hotels in the desert city, at $268.38.
The growth in Total Revenue was led by a 3.9-percent increase in RevPAR, to $210.05, which was as a result of year-on-year increases in both room occupancy (+1.5-percentage points) and achieved average room rate (+2.1-percent), as well as increases in Non-Rooms Revenues.
Whilst top line performance at hotels in Arizona was buoyant, the data suggests it was somewhat fuelled by bookings via third party intermediaries, illustrated by the 17.3-percent year-on-year increase in Rooms Costs of Sales (ie the HotStats measure of Travel Agent’s Commissions, Reservation Fees, GDS Fees, Third Party Fees and Internet Booking Fees), to 4.7-percent of Rooms Revenue.
Despite the uplift in Rooms Costs of Sales, hotels in Phoenix were able to cut costs in other departments, which included a 0.1-percentage point saving in Labor costs, to 27.3-percent of total revenue.
As a result, at $183.23, GOPPAR at hotels in Phoenix was 1.3-percent ahead of the same period in 2017 and approximately 95-percent above the rolling 12-months to February 2017, at $94.12.
Profit & Loss Key Performance Indicators – Phoenix (in USD)
February 2018 v February 2017
RevPAR: +3.9% to $210.45
TrevPAR: +1.5% to $382.05
Payroll: -0.1 pts to 27.2%
GOPPAR: +1.3% to $183.23
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.
