European hotels breathed a sigh of relief in early May when the European Centre for Disease Prevention and Control (ECDC) announced that region had passed the peak of coronavirus infections. Now comes the hard part: building back revenue and profitability. But if May data is any indication, things are getting better.
As several countries started to loosen some of their lockdown restrictions, the prodigious profit drop in Europe’s hotel industry showed a significant deceleration on a month-over-month (MOM) basis. GOPPAR in May was down 1.2% compared to the previous month, a welcome result in view of the 119.1% and 122.9% MOM plunges recorded in April and March. And even though GOPPAR remains 125.5% below May of 2019, this reduction is an indicator that the region has likely reached the bottom and is embarking on its way to recovery.
Occupancy recorded an uptick of 1.2 percentage points MOM to 7.3%, which resulted in a 17.9% MOM increase in RevPAR. These results are still far from the numbers recorded in May of the previous year, but they are the first signs of recovery in the region. The turning off of most hotels ancillary revenue stream led to a 5.4% MOM decline in TRevPAR, which equals a 94.2% YOY slump.
Labor costs accompanied the hike in occupancy, recording a 1.2% MOM expansion, while overhead costs were cut by 0.9% MOM. Hoteliers in Europe managed to achieve a 49.7% flex in May, just under the industry standard of 50.0%. Profit conversion in May was recorded at -166.1% of total revenue, down 11.1 percentage points from April and 203.9 percentage points below the same month of the previous year.
Profit & Loss Performance Indicators — Europe (in EUR)
| KPI | May 2020 v. May 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -95.2% to €6.05 | -54.6% to €48.00 |
| TRevPAR | -94.2% to €10.82 | -52.1% to €76.45 |
| Payroll PAR | -70.2% to €16.59 | -32.1% to €36.72 |
| GOPPAR | -125.5% to -€17.99 | -88.9% to €5.46 |
Though still 124.4% below May 2019 levels, profit-per-room in Berlin recorded its first month-on-month positive change since the pandemic outbreak, as GOPPAR increased by 1.0% compared to April. This profitability green shoot is expected to expand in the following months, as COVID-19 cases subside and travel and business restrictions continue to ease.
Hotels in Berlin achieved a 1.4-percentage-point occupancy growth compared to April, while managing to drive average rate up MOM by 4.0%. Consequently, RevPAR recorded a 120.4% MOM increase, albeit still 96.2% down when looked at on a YOY basis. With the slow reopening of restaurants and bars, hotels in the city were able to start capitalizing on their F&B outlets. As a result of these ancillary revenue streams, TRevPAR increased by 34.0% MOM (down 92.9% YOY).
Labor costs and overheads followed the MOM upward trend recorded in the top line, growing by 27.5% and 3.4%, respectively. Profit conversion in May was recorded at -119.2% of total revenue, marking a 42.2-percentage-point increase from April and down 124.4 percentage points when compared to the same month of 2019. Flex in Berlin was recorded at 53.4%, well above the European average.
Profit & Loss Performance Indicators — Berlin (in EUR)
| KPI | May 2020 v. May 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -96.2% to €4.98 | -56.5% to €47.96 |
| TRevPAR | -92.9% to €13.79 | -51.3% to €83.19 |
| Payroll PAR | -68.6% to €17.39 | -36.7% to €35.76 |
| GOPPAR | -124.4% to -€16.44 | -80.7% to €9.21 |
GOPPAR in Budapest remained below zero in May for the third consecutive month. And despite recording a 5.1% MOM decrease, the silver lining is that the profitability downturn curve is starting to flatten, compared to the 636.9% and 108.2% MOM decreases in April and May.
The city recorded a 2.1-percentage-point uptick in hotels occupancy compared to the previous month, which drove the 87.4% MOM growth in RevPAR (down 96.8% YoY). By mid-May, the Hungarian government eased restrictions regarding restaurant and bar operations in the capital, which translated into a 152.9% MOM jump in F&B revenue and a 50.6% MOM increase in TRevPAR.
MOM upswings were also recorded on the expense side, as labor costs increased by 21.0% and overheads did so by 30.4%. Profit conversion in Budapest was recorded at -110.7% of total revenue, placing 48 percentage points above April and 160 percentage points below the same month of the previous year. Hoteliers in Budapest achieved a 37.3% flex in May.
Profit & Loss Performance Indicators — Budapest (in EUR)
| KPI | May 2020 v. May 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -96.8% to €4.61 | -55.5% to €42.00 |
| TRevPAR | -92.2% to €15.53 | -50.0% to €69.00 |
| Payroll PAR | -56.7% to €19.03 | -26.0% to €31.20 |
| GOPPAR | -117.4% to –€17.19 | -87.2% to €6.08 |
