MENA
Following a summer of mixed fortunes, which included a welcome year-on-year increase in profit per room in August, hotels in the Middle East & Africa were back to business as usual this month as GOPPAR levels sunk by 17.1% year-on-year, according to the latest worldwide poll of full-service hotels from HotStats.
September typically marks a return to ‘normal’ trading conditions for hotels in the Middle East & Africa following the disruption during the summer, and with room occupancy levels this month (66.7%) well ahead of the average for the preceding three-month ‘summer’ period at 57.5%, they looked to be back on track.
However, a 10.8% decline in achieved average room rate, to $158.67, wiped out the 1.0 percentage point increase in room occupancy and meant that hotels in the region suffered a 9.5% decline in RevPAR. At $105.80, RevPAR at hotels in the Middle East & Africa was 5.5% below the year-to-date average of $111.93.
The expected resurgence in performance at hotels in the region is characteristically led by the commercial sector. However, in addition to a drop in volume, a year-on-year decline in sector rates was recorded in the corporate (-8.0%) and residential conference (-8.6%) segments this month.
Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)
September 2017 v September 2016
RevPAR: -9.5% to $105.80
TrevPAR: -6.5% to $183.06
Payroll: +2.4 pts to 29.9%
GOPPAR: -17.1% to $59.83
In addition to the drop in Rooms Revenue, hotels in the Middle East & Africa recorded a decline in Non-Rooms Revenue, which included a decrease in Food and Beverage (-1.7%) and Leisure (-7.0%) revenue on a per available room basis. As a result, TrevPAR in the region fell by 6.5% year-on-year to $183.06.
In line with the growth in volume, a 2.4-percentage point increase in Payroll levels was recorded at hotels in the Middle East & Africa, to 29.9% of total revenue. However, the rising costs further exacerbated the issue of falling revenues and as a result GOPPAR levels dropped to just $59.83.
“Despite oil prices hitting a two-year high in late September, a number of key economies across the Middle East & Africa continue to face challenges as they come to terms with the reduction in oil output due to OPEC-imposed cuts and many look to non-oil industries to stimulate growth.
The current challenges in the oil industry have seen Saudi Arabia fall into recession in Q2 2017 with the Qatar economy also struggling. Alongside this, the political landscape in the region is facing major issues. The current challenges in the Middle East & Africa suggest the hotel market will continue to struggle in the short term,” said Pablo Alonso, CEO of HotStats.
Profit & Loss Key Performance Indicators – Dubai (in USD)
September 2017 v September 2016
RevPAR: -13.4% to $126.25
TrevPAR: -9.9% to $232.37
Payroll: +3.2 pts to 32.2%
GOPPAR: -27.6% to $55.83
Whilst Dubai is one of the few key economies in the Middle East & Africa which is much less reliant on the oil industry, the city is facing challenges of its own, as the dynamics of the hotel market shift towards the mid-market segment and the volume of supply in the city multiplies in preparation for Expo 2020.
This month, RevPAR at hotels in Dubai fell by 13.5% year-on-year due to a decline in both room occupancy (-4.2 percentage points) and achieved average room rate (-8.7%) to $162.50, with the decline this month contributing to the 2.7% drop for year-to-date 2017.
It is surprising that the year-on-year decline has not been more severe, with more than 4,000 bedrooms added to the Dubai market in the year to Q3 2017, which have included the 414-bedroom Rixos JBR and the 238-bedroom DoubleTree by Hilton Business Bay, bringing the total number of rooms available to 82,200 bedrooms.
In addition to the drop in RevPAR, hotels in Dubai suffered declines in Non-Rooms Revenue this month, which included a drop in Food and Beverage (-4.4%) and Leisure (-17.9%) revenue on a per available room basis. The decline in revenues across all hotel departments resulted in hotels in Dubai recording a 9.9% decline in TrevPAR, to $232.37.
Escalating costs contributed to the 27.6% decline in GOPPAR at hotels in Dubai this month, which added to the 6.3% drop in this measure for year-to-date 2017 and means Dubai hotels are on course for a third consecutive year of profit decline further to the drop in 2015 (-20.5%) and 2016 (-10.1%).
“The additions to stock in the Dubai hotel market, many of which are in the mid-market segment, are inevitably diluting top line performance which is having a knock-on effect on the rest of the profit and loss.
Despite this, construction projects in the city are continuing unabated and a further 4,100 bedrooms are due to enter the market in Q4 2017, with up to 40,600 rooms being developed in the next two and a half years in the lead up to Expo 2020,” added Pablo.
In contrast to the performance across many hotel markets in the region, hotels in Kuwait were able to record an increase in top and bottom line performance levels in September, but had to work hard to do so.
This month, hotels in Kuwait were able to offset a 7.1% decline in achieved average room rate with a 5.2 percentage point increase in room occupancy levels, resulting in a 3.2% increase in RevPAR, to $110.72. The year-on-year growth in Rooms Revenue contributed to the 2.3% increase in TrevPAR.
As a result of the growth in volume, Payroll levels for hotels in Kuwait increased by 1.3 percentage points to 29.2% of total revenue. Despite the increase in costs, GOPPAR increased by 0.3% to $87.34 this month, equivalent to a profit conversion of 41.1% of total revenue.
Profit & Loss Key Performance Indicators – Kuwait (in USD)
September 2017 v September 2016
RevPAR: +3.2% to $110.72
TrevPAR: +2.3% to $212.65
Payroll: +1.3 pts to 29.2%
GOPPAR: +0.3% to $87.34
EUROPE
GOPPAR levels for hotels across Europe peaked for the year at €93.88 this month, as punchy room occupancy levels enabled hoteliers to leverage achieved average room rate.
Room occupancy levels at hotels in Europe hit 82.5% this month, the highest level recorded in the region since September 2015, when volume hit 82.7%.
Extraordinary room occupancy levels were witnessed at hotels across a range of European cities, including Barcelona (88.5%), Budapest (89.1%), Dublin (92.4%), Prague (90.7%) and Warsaw (88.1%).
The premium room occupancy levels enabled hoteliers to leverage average room rates to good effect with the most significant year-on-year margins of growth recorded in Budapest (+10.0%), Dublin (+31.2%), Istanbul (+26.8%) and Madrid (+17.0%).
September is a month which is renowned for conference activity across the region and alongside a return of demand from the corporate segment after the summer break, it is typically a peak month of performance each year and this year was no different.
Whilst the growth in achieved average room rate was more measured for the region, at +4.3% year-on-year, to €179.72, the rate increase contributed to a 5.5% uplift in RevPAR for hotels in Europe to €148.27.
Profit & Loss Key Performance Indicators – Europe (in EUR)
September 2017 v September 2016
RevPAR: +5.5% to €148.27
TrevPAR: +4.7% to €217.46
Payroll: – 0.2 pts to 28.2%
GOPPAR: +7.0% to €93.88
In addition to the year-on-year growth in RevPAR, an increase in Non-Rooms Departments, including Food and Beverage (+3.8%) and Conference and Banqueting (+3.2%), contributed to the 4.7% increase in TrevPAR, to €217.46, which is the highest TrevPAR level recorded at hotels in Europe since the recession.
In addition to the year-on-year increase in TrevPAR, a reduction in costs, including a 0.2 percentage point saving in Payroll to 28.2% of total revenue, helped hotels in Europe record a 7.0% increase in GOPPAR, to €93.88. This was 52% above the year-to-date profit per room level recorded in the region at €61.59.
“Hotels in Europe are currently benefiting from very strong fundamentals which are driving top and bottom line performance to record levels.
Typically, performance levels at hotels across the region peak for the year either side of the summer due to a seductive blend of commercial and leisure demand. This year is no different and astute operators are effectively yielding demand to record growth across the P&L,” said Pablo Alonso, CEO of HotStats.
Profit & Loss Key Performance Indicators – Milan (in EUR)
September 2017 v September 2016
RevPAR: +20.5% to €229.37
TrevPAR: +17.1% to €319.79
Payroll: – 2.6 pts to 22.5%
GOPPAR: +29.6% to €152.49
The September effect was no better illustrated than in Milan, where occupancy levels reached 86.0%, almost 14 percentage points above the year-to-date average and achieved average room rate soared by 17.0% to fuel a 20.5% increase in RevPAR, to €229.37.
In addition to the volume from the corporate and leisure segment, demand from the meetings and events sector was supported by the European Respiratory Society International Congress, which was hosted by the MiCo Milano Congressi and welcomed more than 22,000 delegates from 130 countries.
The strength of demand in the commercial segment enabled hoteliers in Milan to record a 22.0% increase in the residential conference sector rate to €328.13, with the volume of demand from this segment swelling to 21.4% of the total from just 9.6% of demand in the eight months to August 2017.
In addition to the growth in Rooms Revenue this month, growth in Other Revenue enabled hotels to record a 17.1% increase in TrevPAR, to €319.89. And with Payroll falling by 2.6-percentage points to 22.5% of total revenue, hotels in the Italian city achieved a profit conversion of 47.7% of total revenue.
At €152.49, the GOPPAR recorded at hotels in Milan this month is the highest since the recession, even exceeding September 2015 (€147.73) levels when visitors flooded the city to visit the World Fair.
Hotels in Madrid also fared well in September, recording a 14.9% increase in RevPAR, to €155.16. This was due to a 17.0% increase in achieved average room rate, to €180.98, which offset the 1.7 percentage point decline in occupancy.
Although RevPAR levels this month were behind June, they were still 33.5% ahead of the year-to-date average, of €116.18, illustrating the strength of demand this September.
Profit & Loss Key Performance Indicators – Madrid (in EUR)
September 2017 v September 2016
RevPAR: +14.9% to €155.16
TrevPAR: +10.4% to €217.19
Payroll: – 2.4 pts to 29.1%
GOPPAR: +21.5% to €96.21
For hotels in the Spanish capital, the 21.5% year-on-year increase in profit per room in September contributed to the 17.0% year-to-date increase in GOPPAR and means hotels in Madrid are on course for another great year of bottom line growth in 2017 following the increases in 2015 (+30.7%) and 2016 (+3.3%).
“The performance of the hotel market in Spain is very much aligned with GDP movement, which is due in part to the dependence of the economy on tourism. This is no better illustrated than in the capital, where the recovery from the recession and subsequent surge in economic growth has resulted in consecutive years of profit growth at hotels in Madrid.
That said, whilst after nine long years GDP in Spain returned to pre-recession levels earlier in 2017, profit levels at Madrid hotels recovered their ground some time ago and have since gone from strength to strength on a solid foundation of business and leisure tourism,” added Pablo.
UK
Hotels in Scotland recorded a 15.8% year-on-year increase in GOPPAR this month, which helped the UK hotel market to maintain its upward trajectory in profit per room.
For hotels in the UK, profit per room in September increased by 2.7% year-on-year, which contributed to the 7.3% year-to-date GOPPAR increase and meant UK hoteliers remained on course for a fifth consecutive year of profit growth.
The growth in the bottom line has been successfully fuelled by consistent increases in top line performance, which included a 2.7% increase in RevPAR to £106.61 this month, as a 2.8% uplift in achieved average room rate, to £125.10, offset a 0.1 percentage point decline in room occupancy, to 85.2%.
Year-on-year growth in Rooms Revenue this month was supported by increases in Non-Rooms Departments, including Food and Beverage (+1.9%), Conference and Banqueting (+3.8%) and Leisure (+5.3%), on a per available room basis.
The growth in Other Revenue contributed to the 2.6% year-on-year increase in TrevPAR at UK hotels this month, to £160.09. And in spite of a 0.1 percentage point increase in payroll, to 24.6% of total revenue, hotels in the UK recorded a 2.7% increase in GOPPAR to £70.75 in September.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
September 2017 v September 2016
RevPAR: +2.7% to £106.61
TrevPAR: +2.6% to £160.09
Payroll: + 0.1 pts to 24.6%
GOPPAR: +2.7% to £70.75
Hotels in Scotland made a significant contribution to the year-on-year growth in key performance indicators across the UK, which was led by a 12.6% increase in RevPAR to £100.03, thanks to a 2.0 percentage point increase in room occupancy, as well as a 10.1% increase in achieved average room rate, to £113.73.
The 15.8% increase in profit per room for hotels north of the border, to £63.96, was as a result of an 8.3% increase in TrevPAR to £155.11 and a 1.3 percentage point saving in payroll, to 26.0% of total revenue.
For hotels in Glasgow, top line performance was driven by a 2.8-percentage point increase in room occupancy, to a punchy 91.1%, as well as an 8.1% increase in achieved average room rate to £89.96.
Profit & Loss Key Performance Indicators – Glasgow (in GBP)
September 2017 v September 2016
RevPAR: +11.6% to £81.94
TrevPAR: +6.4% to £125.62
Payroll: – 0.1 pts to 26.7%
GOPPAR: +11.3% to £48.92
The 6.4% increase in TrevPAR, in addition to a 0.1 percentage point saving in payroll, to 26.7% of total revenue, helped Glasgow hotels record an 11.3% year-on-year increase in GOPPAR in September, to £48.92. This is equivalent to a profit conversion of 38.9% of total revenue.
“Edinburgh has undoubtedly been the star of the show in the Scottish hotel market in 2017. However, this month it was the turn of other cities to shine. In Glasgow, hotels have finally shaken off their post-Commonwealth Games hangover and are on course for a strong year of profit growth.
With the Hydro now in full swing, attracting major music artists, and the SECC continuing to compete effectively for major conferences, as well as Glasgow’s strong profile as a destination for business and leisure visitors, the fundamentals of the hotel market suggests that the ground lost in 2015 and 2016 should be recovered,” said Pablo Alonso, CEO of HotStats.
For hotels in Aberdeen, this month provided respite from the challenges the market has faced since the beginning of the oil crisis, as hotels in the UK’s energy hub recorded a 79.1% year-on-year increase in profit per room to £31.23.
Somewhat ironically, the boost in performance this month was as a result of the oil and gas industry, as the Aberdeen Exhibition and Conference Centre welcomed 35,000 delegates to the SPE Offshore Conference, which fuelled a 23.8% increase in RevPAR, to £59.50, which was primarily due to an 18.5% increase in achieved average room rate to £80.12.
Profit & Loss Key Performance Indicators – Aberdeen (in GBP)
September 2017 v September 2016
RevPAR: +23.8% to £59.50
TrevPAR: +21.2% to £81.85
Payroll: +4.5 pts to 27.2%
GOPPAR: +79.1% to £31.23
Growth in Non-Rooms Revenues contributed to the 21.2% increase in TrevPAR, to £81.85, and with hotels in Aberdeen operating at a low cost base as a necessary response to the top line decline in the market in recent years, GOPPAR levels for September soared.
The addition of 328 bedrooms into the Aberdeen market so far in 2017, all of which are operating under the Hampton by Hilton brand, means the market remains challenged and the growth in September will not outweigh the -17.7% drop in profit already suffered in the eight months to August 2017.
However, it is a marked improvement on the consecutive years of decline in profit per room in 2015 (-36.2%) and 2016 (-54.8%),
“Whilst the pace of profit decline has slowed in 2017, the reprieve for Aberdeen hotels this month is likely to be short lived. And with no obvious signs of a recovery in oil prices and a further 344 bedrooms due to enter the market in the next 12 months, including the 126-bedroom Marriott Residence Inn and the 218-bedroom Sandman Signature, the situation could remain difficult.
For owners and operators of hotels in Aberdeen, up until now cost cutting measures to minimise losses have been vital to maintain profit levels. But unless the situation improves, further cuts will be untenable and astute hotel management will be essential for survival,” added Pablo.
US
Hotels in the USA recorded a 5.9-percent decline in profit per room this month as trading for much of the South and South East region was disrupted by one of the most devastating hurricane seasons on record.
The 2.1-percent decline in RevPAR at hotels in the USA in Spetember, was due to a 0.6-percentage point drop in room occupancy, to 77.7-percent, as well as a 1.3-percent drop in achieved average room rate, to $202.79.
In addition to the drop in RevPAR, hotels in the USA suffered declines in Non-Rooms Revenues, including Food and Beverage (-6.8-percent) and Conference and Banqueting (-9.1-percent) on a per available room basis. As a result, year-on-year growth in TrevPAR fell by -3.2-percent, to $242.93.
Profit & Loss Key Performance Indicators – USA (in USD)
September 2017 v September 2016
RevPAR: -2.1% to $157.49
TrevPAR: -3.2% to $242.93
Payroll: + 2.6 pts to 35.5%
GOPPAR: -5.9% to $89.97
The drop in total revenue was further impacted by rising costs, including a 2.6-percentage point increase in Labor to 35.5-percent of total revenue. As a result, profit per room at hotels in the USA fell by 5.9-percent to $89.97, equivalent to a profit conversion of 37.0-percent.
Whilst hotels in the USA have faced a challenging period of operation over the last three months, year-to-date profit levels remain 1.1-percent ahead of the same period in 2016, at $93.71.
Hotels in Miami were amongst the worst hit in the South East region of the USA by the hurricane activity in September, with Irma being the most significant cause of disruption to the city.
Despite a last-minute shift away from Miami and towards the west coast of Florida, which undoubtedly limited the destruction to property, the city-wide evacuation left hotels abandoned for more than one week and as a result, top line performance crashed.
The biggest impact was on volume, illustrated by the 17.4-percentage point decline in room occupancy, to just 63.7-percent, well below the averages typically achieved in the city. And in spite of a 2.8-percent increase in achieved average room rate, to $140.23, year-on-year RevPAR levels at hotels in Miami dropped by 19.2-percent to $89.33.
Profit & Loss Key Performance Indicators – Miami (in USD)
September 2017 v September 2016
RevPAR: -19.2% to $89.33
TrevPAR: -28.7% to $128.45
Payroll: +7.8 pts to 44.6%
GOPPAR: -60.6% to $19.32
“This year has been one of the costliest Atlantic hurricane seasons on record, with experts predicting that it will even outpace the 2005 season when storms such as Katrina, Rita and Wilma wreaked havoc on the east coast with an estimated economic toll of $211 billion.
The timing of the storm meant that hotels in Miami also lost out on demand from the Labor Day weekend, typically a strong period of trading,” said Pablo Alonso, CEO of HotStats.
Whilst there was a market-wide drop in demand from all segments, significant declines in achieved average room rate were recorded in the Corporate (-14.0-percent) and Residential Conference (-24.0-percent) segments, suggesting demand from the commercial sector stayed away.
As a result of the significant drop in volume, hotels in Miami recorded declines in revenue across all departments which contributed to the 28.7-percent drop in TrevPAR, to $128.45.
In addition to plummeting revenue levels, and the temporary closure of a number of hotels before and after Irma made ground, properties were unable to react quickly enough to slash their cost base and as a result profit per room at hotels in the city plunged by 60.6-percent, to just $19.32, by far the lowest this measure has been recorded in recent years.
In contrast to the negative impact of the hurricane season on hotels in Miami, properties in Houston recorded one of their strongest months of year-on-year top and bottom line growth in September, which was primarily as a result of the flooding associated with Hurricane Harvey.
As one of the world’s major energy hubs, hotels in Houston have been hit hard by the crash in oil prices and associated impact on demand, which has led to a 17.0-percent decline profit per room in the last 24 months to $62.51 in the 12 months to September 2017.
However, this month, hotels in the city successfully recorded a 16.7-percent increase in RevPAR, which was primarily due to a 10.9-percentage point increase in room occupancy, to 83.0-percent.
“In the aftermath of the flooding caused by hurricane Harvey, hotels in Houston have been inundated with demand for accommodation, which was helped by a 14-day suspension of local hotel and motel occupancy tax for relief-effort personnel and storm victims.
However, the bitter sweet respite in top and bottom line performance decline is likely to be short lived, as the flood waters recede and the city goes back to the challenges of ‘business as usual’,” added Pablo.
Profit & Loss Key Performance Indicators – Houston (in USD)
September 2017 v September 2016
RevPAR: +16.7% to $127.68
TrevPAR: +0.2% to $167.71
Payroll: +0.2 pts to 28.3%
GOPPAR: +11.9% to $77.69
The uplift in demand resulted in hotels in Houston achieving an 11.9-percent increase in GOPPAR, to $77.69, which represented one of the strongest months of performance in 2017 with profit per room recorded at 24.3-percent above the average for the 12 months to September 2017.
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.
GOP PAR – Is the Total Gross Operating Profit for the period divided by the total available rooms during the period.
