MIDDLE EAST & AFRICA
Profit per room at hotels in the Middle East & Africa fell by 12.1% year-on-year in April as revenue levels crashed on the back of plummeting achieved average room rate, according to the latest worldwide poll of full-service hotels from HotStats.
Further to a seemingly positive period of operation in Q1 2018, in which hotels in the Middle East & Africa recorded a 0.9% year-on-year increase in profit per room, properties in the region have been hit hard this month by a 12.1% decline in GOPPAR, which fell to $93.21.
The drop in profit per room was led by falling TrevPAR levels, which fell by -7.4%, to $224.61, as a result of a decline in revenue in the Rooms department (-7.8%), as well as falling Non-Rooms Revenue, including Food & Beverage (-6.7%) and Conference & Banqueting (-3.0%).
And whilst hotels in the Middle East & Africa successfully recorded an uplift in volume once again this month, illustrated by the 0.3-percentage point increase in room occupancy, to 74.9%, this was entirely wiped out by the 8.8% decline in achieved average room rate, which fell to $176.22.
Although price has been something that hotels in the Middle East & Africa have been battling with over the last 12 months, this month was notable for the decline in rate across all market segments, including Best Available Rate (-15.7%), Residential Conference (-7.4%), Corporate (-9.1%), Individual Leisure (-3.3%) and Group Leisure (-5.6%).
Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)
April 2018 v April 2017
RevPAR: -7.8% to $132.01
TrevPAR: -7.4% to $224.61
Payroll: +1.5 pts to 25.0%
GOPPAR: -12.1% to $93.21
The decline in revenue levels was further exacerbated by escalating costs, which included a 1.5-percentage point increase in Payroll, to 25.0% of total revenue, as well as a 1.2 percentage point uplift in Overheads, to 23.8% of total revenue.
As a result of the movement in revenue and costs this month, profit per room in the region fell to $93.21, equivalent to a profit conversion of 41.5% of total revenue, which contributed to the -2.8% decline in GOPPAR for year-to-date 2018.
“2018 was shaping up to be a positive year for hotels in the Middle East & Africa, having recorded year-on-year growth in profit per room in Q1 2018.
However, the decline this month means that profit performance in the region is now back in the red and hotels face another year of decline following the challenges in 2016 and 2017,” said Pablo Alonso, CEO of HotStats.
One of the worst hit markets this month was Manama, which recorded significant decreases in top and bottom line performance, in spite of the province hosting the Formula One Grand Prix.
Profit per room at hotels in the capital of Bahrain fell by 24.5% year-on-year, $61.41, which was on the back of declining revenue levels and rising costs.
In line with the Middle East & Africa market overall, achieved average room rate at hotels in Manama plummeted by 7.7%, to $179.26. However, hotels also recorded a 10.9-percentage point decline in room occupancy, which fell to 58.1%, and contributed to the 22.2% drop in RevPAR, to $104.23.
As a result of the drop in volume at hotels in Manama, declines were also recorded in Non-Rooms Revenues, which included a significant year-on-year decrease in Food and Beverage (-23.8%), Conference and Banqueting (-19.1%) and Leisure (-16.0%) revenue.
Profit & Loss Key Performance Indicators – Manama (in USD)
April 2018 v April 2017
RevPAR: -22.2% to $104.23
TrevPAR: -22.1% to $159.51
Payroll: +1.5 pts to 27.5%
GOPPAR: -24.5% to $61.41
Profit levels were hit further by a 1.5-percentage point increase in Payroll, to 27.5% of total revenue, which contributed to profit conversion tumbling to 38.5% of total revenue.
“Although the Bahrain Tourism and Exhibitions Authority (BTEA) reported that hotels in the area benefited from 23,000 room bookings during the weekend of the Grand Prix, this does not seem to have translated to the usual buoyant performance for hotels in Manama.
Whilst recent hotel openings, including the 441-bedroom Wyndham Garden and the 164-bedroom Park Regis Lotus Hotel, are likely to have dampened performance this month, it is clear that the challenging economic conditions are continuing to hamper hotel performance in the Bahrain capital,” added Pablo.
In line with the decline in performance levels in Manama, hotels in the Qatari capital Doha are continuing to face challenges, partly borne out of the trade blockade imposed by Saudi Arabia, the UAE, Bahrain and Egypt.
In addition to falling room occupancy levels, which dropped by 4.2-percentage points this month, to 71.2%, hotels in Doha are struggling to maintain price, which fell by 12.7% this month to $158.58.
This contributed to the ongoing drop in achieved average room rate in Doha, which has fallen by almost $60 over the last three years, to $160.82 in the 12 months to April 2018, from $218.42 during the same period in 2014/2015.
The 17.5% decline in Rooms Revenue, in addition to falling Non-Rooms revenues contributed to the 11.7% decline in TrevPAR at hotels in Doha in April, to $297.73.
And despite cost savings, which included a 1.1-percentage point reduction in Payroll, to 25.0% of total revenue, hotels in Doha suffered a 14.2% decline in profit per room in April, to $112.51. This is equivalent to a profit conversion of 37.8% of total revenue.
The decline this month contributed to the 9.8% year-to-date drop in this measure, to $105.30.
Profit & Loss Key Performance Indicators – Doha (in USD)
April 2018 v April 2017
RevPAR: -17.5% to $112.95
TrevPAR: -11.7% to $297.73
Payroll: -1.1 pts to 25.0%
GOPPAR: +14.2% to $112.51
EUROPE
Following a period of lacklustre growth in Q1 2018, hotels in Europe recorded an impressive 18.9% increase in profit per room in April as a result of soaring revenues and falling costs.
Hotels in Europe recorded an 8.5% increase in TrevPAR this month, to €178.41, which was on the back of growth in Rooms revenue (+7.7%), as well as increases in Non-Rooms Departments, including Food & Beverage (+10.7%) and Conference & Banqueting (+22.9%) revenue, on a per available room basis.
The growth in Rooms revenue was led by a 5.4% increase in achieved average room rate, to €159.92, and supported by a 1.6-percentage point increase in room occupancy, to 73.7%, as the upward trajectory in RevPAR levels continued.
The growth in achieved average room rate this month was led by robust increases in rate in the commercial sector, including the Residential Conference (+9.1%) and Corporate (+11.1%) segments.
And despite a 4.2% year-on-year drop in rate in the Individual Leisure segment, a 9.5% increase was recorded in the Group Leisure Segment, which grew to €111.37 for the month.
The growth in RevPAR in April contributed to the 5.8% increase in this measure in the rolling 12 months to April 2018, at €115.27.
The Food & Beverage department recorded one of the most significant year-on-year increases in profit per room in April, which grew by 29.7% on a per available room basis, to €13.13.
In addition to the increase in Food (+9.0%) and Beverage (+7.9%) revenue on a per available room basis, hotels recorded savings in departmental costs, which included a drop in Food & Beverage Cost of Sales (-0.5 percentage points) and Food & Beverage Payroll (-2.9-percentage points).
As a result of the movement in revenue and costs, profit conversion in the Food & Beverage department increased by 3.6-percentage points, to 24.7% of departmental revenue.
Profit & Loss Key Performance Indicators – Europe (in EUR)
April 2018 v April 2017
RevPAR: +7.7% to €117.79
TrevPAR: +8.5% to €178.41
Payroll: -1.8 pts to 33.3%
GOPPAR: +18.9% to €62.84
In addition to the growth in revenue across all departments, cost savings included a 1.8-percentage point decrease in Payroll, to 33.3% of total revenue, as well as a 1.4 percentage point drop in Overheads, to 21.8% of total revenue.
As a result, hotels in Europe recorded a twelfth consecutive month of profit growth in April, which climbed by 18.9% year-on-year to €62.84 per available room. This was equivalent to a profit conversion of 35.2% of total revenue.
This month was marked by strong performances from a number of major cities, which included Budapest, where hotels recorded a 15.8% year-on-year increase in profit per room in April, which was on the back of growth across all revenue centres.
Whilst volume levels at hotels in Budapest are declining, this is being more than offset by the growth in achieved average room rate as the city’s hoteliers find themselves in the luxurious position of being able to leverage price to a new high due to elevated demand levels and the current undersupply of hotel accommodation.
This was exemplified by the performance in the Hungarian capital in April, where a 2.4-percenatage point drop in room occupancy, which remained robust at 81.5%, was offset by the 8.3% year-on-year increase in achieved average room rate, to €129.34.
The rate growth this month contributed to the increase in this measure of almost €35 over the last three years, to €126.19 in the rolling 12 months to April 2018, from €91.38 during the same period in 2014/15.
The growth in Rooms Revenue is being supported by increases in Non-Rooms Departments, which helped to drive a year-on-year TrevPAR increase of 9.8%, to €151.22.
In addition to the growth in revenue, hotels in Budapest have been able to maintain an efficient cost base, with Payroll levels remaining at a lowly 24.8% of total revenue this month.
Profit & Loss Key Performance Indicators – Budapest (in EUR)
April 2018 v April 2017
RevPAR: +5.2% to €105.40
TrevPAR: +9.6% to €151.22
Payroll: +0.0 pts to 24.8%
GOPPAR: +15.8% to €66.66
As a result of the movement in revenue and costs, profit levels at hotels in Budapest accelerated to €66.66 per available room in April, equivalent to a profit conversion of 44% of total revenue, which is well above Europe overall and one of the most efficient markets in the region.
“The unrelenting increase in the number of tourists to Hungary, the majority of which will visit Budapest, continued in 2017 and was led by a 7.9% increase in the number of international visitors, which is enabling hoteliers to drive top and bottom line performance.
However, with approximately 1,000 bedrooms, mooted for development in the Hungarian capital in the next few years, many of which will be developed out by major international brands, it will be interesting to see if growth levels can be maintained,” said Pablo Alonso, CEO of HotStats.
Huge increases in top and bottom line performance at hotels in Brussels also contributed to the growth across the region this month.
The Belgian capital and seat of the European government has recorded profit growth of more than €15 since hitting a low of just €22.30 in the 12 months to October 2016 in the wake of the terrorist attacks, which took place just over two years ago.
The recovery in profit levels at hotels in Brussels hit a high of €37.98 in the rolling 12 months to April 2018 and was punctuated by the 65.9% year-on-year GOPPAR increase this month, to €56.24.
The 18.1% increase in RevPAR this month was primarily driven by a +7.7-percentage points increase in room occupancy, to 76.8, in addition to a +6.2% increase in achieved average room rate, to €161.73, which was the highest rate recorded in the city in recent years.
Profit & Loss Key Performance Indicators – Brussels (in EUR)
April 2018 v April 2017
RevPAR: +18.1% to €124.27
TrevPAR: +17.1% to €165.69
Payroll: -8.0 pts to 38.0%
GOPPAR: +65.9% to €56.24
Profit growth at hotels in Brussels was also helped by an 8.0-percentage point drop in Payroll levels, although they remained high at 38.0% of total revenue.
UK
Profit growth at hotels in the UK failed to match the soaring temperatures in April as the ongoing cost creep meant year-on-year growth in total revenue was completely wiped out and led to a -0.9% decline in GOPPAR.
Hotels in the UK recorded a 0.6% year-on-year increase in TrevPAR in April, which grew to £134.12, as the country basked in record temperatures, wiping out the memories of the endless winter.
However, the marginal revenue increase was not sufficient to offset the uplift in costs, which this month included a 0.4-percentage point increase in Payroll to 29.6% of total revenue, as well as a 0.1 percentage point increase in Overheads, which grew to 22.8% of total revenue.
As a result of the movement in revenue and costs, profit per room at hotels in the UK fell by -0.9% to £47.98. This represented a sixth consecutive month of year-on-year profit decline and contributed to the -3.7% decline in this measure for year-to-date 2018, to £39.31 per available room.
In addition to escalating costs, one of the key challenges to performance at hotels so far in 2018 has been volume levels, which appear to be on the slide.
This was illustrated by the 0.9-percentage point year-on-year drop in room occupancy this month, to 77.8%, which completely wiped out the 0.8% increase in achieved average room rate, to £112.56, and contributed to the 0.3% drop in RevPAR, to £87.59.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
April 2018 v April 2017
RevPAR: -0.3% to £87.59
TrevPAR: +0.6% to £134.12
Payroll: + 0.4 pts to 29.6%
GOPPAR: -0.9% to £47.98
Despite recording increases in rate in the commercial sector, which included an uplift in the Conference (+12.6%) and Corporate (+0.1%) segments, hotels in the UK were let down by rate declines in the Leisure (-4.2%) and Group Tours (-1.6%) segments, which was somewhat surprising considering the warm weather.
“Demand levels have softened since the beginning of 2018, which may be attributed to the poor weather, the slowing in the UK economy and, this month, the timing of Easter.
But it’s also clear that the increase in minimum wage and employer pension contributions have caused an increase in payroll levels. So, despite a rise in TrevPAR, payroll as a percentage of total revenue has grown and taken a bite out of profits,” said Pablo Alonso, CEO of HotStats..
One city which bucked the national trend of profit decline in April was Brighton. However, in line with the performance of the UK overall, top line growth for hotels in the south coast city was driven by an increase in demand from the commercial segments, rather than leisure.
The growth in volume this month was led by demand generated in the city by the 2018 edition of the IATEFL Conference, which attracted more than 3,000 attendees from more than 100 countries.
The conference fuelled an increase in volume from the commercial segment, which increased to 39.4% of total demand for the month, which is well above the contribution from the Residential Conference and Corporate sectors in the rolling 12 months to April 2018, at 34.9% of roomnights sold.
Despite the overall decline in achieved average room rate this month, which fell by 1.6% to £107.03, the volume of attendees to the annual IATEFL event supported an uplift in segment rate in the Residential Conference (+5.2%) and Corporate (+7.0%) sectors.
RevPAR at hotels in Brighton increased by 3.6% in April to £87.57 and was driven by a 4.1-percentage point increase in room occupancy, to 81.8%.
The uplift in Rooms Revenue was supported by increases in Non-Rooms Departments, which contributed to the 2.5% increase in TrevPAR in April, to £133.78.
Profit & Loss Key Performance Indicators – Brighton (in GBP)
April 2018 v April 2017
RevPAR: +3.6% to £87.57
TrevPAR: +2.5% to £133.78
Payroll: +0.2 pts to 25.9%
GOPPAR: +6.7% to £53.03
Whilst hotels in Brighton suffered a 0.2-percentage point increase in Payroll, to 25.9% of total revenue, it was far outweighed by the growth in top line performance, which contributed to the 6.7% year-on-year increase in profit per room in April, to £53.03.
“Although Brighton is traditionally a popular destination for leisure visitors, which has been boosted over the last 24 months by a Brexit-related uplift in domestic tourism, demand levels are also supported by the strong conference and convention offering, with significant capacity available at the Brighton Centre, as well as a number of the local hotels,” added Pablo.
The profit growth this month continued the positive performance for hotels in Brighton so far in 2018 and contributed to the 8.8% increase in GOPPAR for year-to-date 2018, to £31.28. The growth this year will be a welcome respite after the 2.2% drop in this measure in 2017.
Hotels in Aberdeen have also seen a welcome recovery in performance since the beginning of the year, with GOPPAR growth recorded at +4.0% for the year-to-date 2018; although profit per room remains low at just £10.76.
As top line performance levels plummeted in recent years, it was essential that hotels in Aberdeen were able to trim the fat in order to survive. And with this operational mentality, hotels in the oil and gas capital of the UK were able to record a 34.0% year-on-year increase in GOPPAR this month, albeit to a lowly £12.74, on the back of a 10.5% increase in TrevPAR.
Profit & Loss Key Performance Indicators – Aberdeen (in GBP)
April 2018 v April 2017
RevPAR: +11.6% to £41.98
TrevPAR: +10.5% to £57.08
Payroll: -2.8 pts to 34.0%
GOPPAR: +34.0% to £12.74
Whilst the recovery in Rooms revenue at hotels in Aberdeen has primarily been in volume, this month an increase was recorded in both room occupancy (+6.3 percentage points), to 69.0%, and achieved average room rate (+1.5%), to £60.85, which fuelled the 3.3% increase in RevPAR, to £41.98.
The growth in RevPAR at hotels in Aberdeen this month was supplemented by encouraging increases in Non-Rooms Revenue, including Food & Beverage (+9.4%) and Conference & Banqueting (+36.8%) on a per available room basis.
USA
Total Revenue levels at hotels in the USA hit a high of almost $290 per available room in April as strong, year-on-year revenue increases were recorded across all operating departments.
The TrevPAR measure encompasses the revenue generated across all operating departments at hotels in the USA, which this month was led by a 5.6-percent year-on-year increase in revenue in the Rooms department, as well as growth in Non-Rooms revenues, including Food & Beverage (+8.4-percent) and Conference & Banqueting (+11.6-percent) on a per available room basis.
The growth across all revenue centers fuelled a 6.5-percent year-on-year increase in TrevPAR, which hit a post-GFC high of $287.53 per available room in April and meant revenue levels edged past the $285.87 achieved in this measure last month.
Whilst growth in RevPAR included a 0.2-percentage point year-on-year increase in room occupancy, to a robust 82.0-percent, it was led by the 4.6-percent increase in achieved average room rate, which was recorded at $218.78 this month, just short of the peak in this measure in March.
In addition to the growth in revenue, hotels in the USA were further buoyed by an increasingly uncommon decline in Labor costs, which fell by 0.4-percentage points to 32.1-percent of total revenue.
Profit & Loss Key Performance Indicators – USA (in USD)
April 2018 v April 2017
RevPAR: +5.6% to $179.32
TrevPAR: +6.5% to $287.53
Payroll: 0.4 pts to 32.1%
GOPPAR: +9.1% to $120.02
Flow Through +56.8%
As a result of the movement in revenue and costs, profit per room at hotels in the USA grew by 9.1-percent year-on-year in April, to $120.02, which was only just behind the previous high of $121.56 recorded in October 2017.
Additionally, the cost savings enabled hotels in the USA to record a profit flow through of 56.8-percent this month, highlighting the ability of hoteliers to drive profit levels during periods of positive performance.
The profit per room increase this month helped to shore up the year-to-date growth in bottom line performance at hotels in the USA, which was recorded at +3.9-percent for the four months to April 2018, to $102.39.
“April marked another month of positive trading for hotels in the USA. It’s very pleasing to see the high levels of conversion being achieved at a very punchy 41.7-percent of total revenue this month
Particularly notable is the healthy level of flow through where the less profitable non-rooms generating departments led the revenue growth,” said Pablo Alonso, CEO of HotStats.
For hotels in San Francisco, the buoyant performance in April provided some respite from a fairly mixed period of trading since the beginning of the year.
Hotels in San Francisco posted an 18.9-percent year-on-year increase in TrevPAR in April, to $348.84, which was fuelled by the week-long RSA security conference, which took place at the Moscone Center and helped boost demand for hotel accommodation across the city.
The annual conference welcomed more than 42,000 attendees in 2018, with 550-expert-led sessions and more than 650 exhibitors.
As a result, whilst occupancy levels broadly remained stable at 88.4-percent, hotels in San Francisco were able to leverage price to record a 16.3-percent year-on-year increase in achieved average room rate, to $283.34, which fuelled the 16.1-percent increase in RevPAR, to $250.50.
The rate growth was led by a 27.0-percent year-on-year increase in the Best Available Rate category, which soared by almost $70 to $314.29 and was by far the highest sector rate recorded at hotels in the city this month. Additionally, increases were also recorded in rate in the Conference (+5.7-percent), Corporate (+7.8-percent) and Leisure (+22.5-percent) segments.
Whilst it was a strong month of trading, hotels in San Francisco may have left some cash on the table as the data suggests that a significant proportion of roomnights were booked through third party intermediaries. This was evidenced by the 35.3-percent year-on-year increase in Rooms Cost of Sales (ie the HotStats measure of Travel Agents’ Commissions, Reservation Fees, GDS Fees, Third Party Fees and Internet Booking Fees), to $13.52 per available room, equivalent to 5.4-percent of Rooms Revenue.
Aside from this, it was a positive month for hotels in San Francisco as the weight of attendees to the RSA conference also fuelled the appetite for ancillary facilities, which meant growth was successfully recorded in Non-Rooms revenues, including Food & Beverage (+29.9-percent) and Conference & Banqueting (+36.5-percent) on a per available room basis.
Profit & Loss Key Performance Indicators – San Francisco (in USD)
April 2018 v April 2017
RevPAR: +16.1% to $250.50
TrevPAR: +18.9% to $348.84
Payroll: -3.7 pts to 39.1%
GOPPAR: +35.0% to $133.55
Flow Through: 62.6%
Furthermore, the weight of revenue growth enabled hotels in San Francisco to record a saving in Labor costs, which fell by 3.7-percentage points to 39.1-percent of total revenue and contributed to the 35.0-percent year-on-year increase in profit per room in April, to $133.55.
Further down the Pacific coastline, whilst hotels in San Diego also recorded a positive month of trading, it was well behind the year-on-year growth in San Francisco.
The 3.1-percent increase in TrevPAR, to $309.29, continued the mixed performance in San Diego since the beginning of 2018.
“Despite a 1.0-percent increase in profit per room for the month, to $143.78, flow through was recorded at just 16.1-percent, way below the industry average expectation of 50% flow, which continues to highlight the challenges operators are facing with tightening profit margins in a period of increasing operating costs.” Added Pablo.
Profit & Loss Key Performance Indicators – San Diego (in USD)
April 2018 v April 2017
RevPAR: +2.6% to $197.82
TrevPAR: +3.1% to $309.29
Payroll: +1.5 pts to 28.5%
GOPPAR: +1.0% to $143.78
Flow Through: 16.1%
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.
