MIDDLE EAST & AFRICA
Profit per room at hotels in the Middle East & Africa increased by 25.6 percent year-on-year in August, with multiple markets across the region benefitting from celebrations to mark the Eid al-Adha Holy festival, according to the latest data tracking full-service hotels from HotStats.
This was only the third month of profit growth at hotels in the Middle East & Africa this year, but it was the largest year-on-year margin of increase for at least a year, with GOPPAR hitting $60.08 for the month—almost $25 above last month’s historic low at $35.81.
“Eid al-Adha is one of the most important festivals in the Islamic calendar and one of the most important months of trading for numerous hotel markets across the Middle East & Africa,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “Whilst the growth this month was certainly concentrated in particular markets, the strength of the uplift generated a positive impact across the entire region.”
Though year-to-date GOPPAR levels remain 2.1 percent behind the same period last year, at $69.69, the overall profit picture is a lot brighter now than it was as recent as July.
Profit growth in August was driven by an increase across all top-line revenues, which included growth in rooms (up 12.0 percent), food & beverage (up 2.5 percent) and conference & banqueting (up 10.6 percent) on a per available room basis, which contributed to the 8.0-percent increase in TRevPAR for the month to $179.33.
The region also handled expenses more efficiently, securing a 1.4-percentage-point saving in payroll, which dropped to 29.7 percent of total revenue, as well as a 1.8-percentage-point saving in overheads.
As a result of the movement in revenue and costs, profit conversion at hotels in the Middle East & Africa was recorded at 33.5 percent of total revenue in August, which is slightly below the margin for year-to-date 2018 at 35.8 percent, but illustrative of the positive performance of hotels in the region.
Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)
August 2018 v August 2017
RevPAR: +12.0% to $110.61
TRevPAR: +8.0% to $179.33
Payroll: -1.4 pts to 29.7%
GOPPAR: +25.6% to $60.08
The key location to benefit from Eid al-Adha in August, as well as the Hajj celebration which precedes it, was Makkah, where profit per room soared by almost 100 percent year-on-year to $386.90.
The year-on-year growth in GOPPAR was driven by revenue increases across all departments. This included a 68.8-percent increase in RevPAR, which was fuelled by an 8.8-percentage point increase in room occupancy to 84.1 percent, as well as a 51.1-percent increase in achieved average room rate, which soared to $438.78.
As a result, RevPAR at hotels in Makkah was recorded at $368.93 this month, more than $190 above the year-to-date figure of $176.78.
Meanwhile, due to higher ancillary spend this month, TRevPAR hit a peak at $506.41, with growth recorded across all non-rooms departments, including food & beverage (up 61.7 percent) and conference & banqueting (up 197.8 percent) on a per-available-room basis.
In addition to the growth in revenue, profit levels were further boosted by cost savings, led by a 5.3-percentage point drop in payroll, which fell to just 8.7 percent of total revenue.
As a result of the movement in revenue and costs, profit conversion at hotels in Makkah was recorded at a robust 76.4 percent of total revenue.
Profit & Loss Key Performance Indicators – Makkah (in USD)
August 2018 v August 2017
RevPAR: +68.8% to $368.93
TRevPAR: +70.0% to $506.41
Payroll: -5.3 pts to 8.7%
GOPPAR: +97.3% to $386.90
In contrast to the positive performance at hotels in Makkah, it was a tougher month for commercial-led Kuwait City, where room occupancy levels fell by 3.8 percentage points, to 39.3 percent.
Whilst low volume levels are not uncommon for properties in the capital of Kuwait during the summer, the drop this month led to a 7.7-percent decline in RevPAR to $84.01; this despite a 1.4-percent year-on-year increase in achieved average room rate to $213.94.
Profit & Loss Key Performance Indicators – Kuwait City (in USD)
August 2018 v August 2017
RevPAR: -7.7% to $84.01
TRevPAR: -3.5% to $159.11
Payroll: +1.5 pts to 36.8%
GOPPAR: +4.5% to $51.61
The drop in rooms revenue was accompanied by declines in non-rooms revenue, which contributed to the 3.5-percent year-on-year decrease in TrevPAR to $159.11.
In addition to the drop in revenues, hotels in Kuwait City suffered a 1.5-percentage-point payroll increase this month to 36.8 percent.
However, savings in unallocated expenses, which included a drop in Admin & General (down 43.6 percent), Sales & Marketing (down 17.1 percent) and Property & Maintenance (down 8.6 percent), on a per-available-room basis, ameliorated the drop in revenue and contributed to the 4.5-percent increase in profit per room to $51.61.
EUROPE
August represented a third consecutive month of significant profit growth for hotels in Europe as GOPPAR levels soared by 11.8 percent due in part to increases across all revenue departments as well as cost savings.
August was another outstanding month of profit growth for hotels in Europe, following year-on-year increases recorded in June (up 23.4 percent) and July (up 16.9 percent).
As a result, GOPPAR has now increased by 11.7 percent in the eight months to August 2018, paving the way for a bumper year of profit growth for hotels in Europe and continuing a significant incline since 2016 when profit growth was down 1.6 percent, followed by an 8.9-percent jump in 2017.
The growth this month was led by an 8.3-percent increase in RevPAR as hotels in Europe recorded a 1.7-percentage-point increase in room occupancy to 78.0 percent, coupled with a 5.8-percent increase in achieved average room rate, which hit €169.86.
In addition to the increase in rooms revenue, year-on-year growth was also recorded in non-rooms departments, including food & beverage (up 5.7 percent) and conference & banqueting (up 12.1 percent) on a per available room basis, which contributed to the 7.3-percent lift in TRevPAR in August to €184.48.
In addition to the positive movement in revenue, cost savings, which included a 0.7-percentage-point decrease in payroll to 30.9 percent of total revenue, as well as a 0.3-percentage-point drop in overheads, contributed to the punchy year-on-year growth in profit.
As a result of the movement in revenue and costs, profit conversion at hotels in Europe was recorded at 38.3 percent of total revenue in August, which is above the margin for year-to-date 2018 at 35.9 percent, illustrating the positive performance recorded at hotels in the region this month.
Profit & Loss Key Performance Indicators – Europe (in EUR)
August 2018 v August 2017
RevPAR: +8.3% to €132.56
TrevPAR: +7.3% to €184.48
Payroll: -0.7 pts to 30.9%
GOPPAR: +11.8% to €70.65
“Whilst it was a very positive month of performance for hotels in Europe this month, our data suggests that the overall growth was primarily driven by locations in the north and east of the region. This was, in part, due to the south west being hit by sweltering temperatures, which deterred visitors to the typically-bustling capital cities,” said Michael Grove, Director of Hotel Intelligence and Customer Solutions, EMEA, at HotStats.
Barcelona Blues
Warm temperatures contributed to hotels in Barcelona recording a 26.4-percent year-on-year decline in profit per room this month, but this may also be due to the wider reported decline in the number of visitors to Spain in 2018, the result of which will have been particularly noticeable during the leisure-led month of August.
It was a top-down decline in performance for hotels in the Catalan capital this month, as RevPAR fell by 19.5 percent as a result of a 4.4-percentage-point drop in room occupancy to 82.4 percent, as well as a 15.1-percent decline in achieved average room rate, which fell to €241.62.
Significant declines were also recorded in non-rooms revenues in August, which included a 12.5-percent drop in food & beverage revenue and a 33.7-percent year-on-year decline in conference & banqueting revenue.
Furthermore, the contribution from non-rooms revenue at hotels in Barcelona this month was well below year-to-date averages, at just 28.9 percent of total revenue against 35.9 percent for the eight months to August 2018.
This was further illustrated by the significantly lower contribution from food & beverage revenue on a per-available-room basis at €67.00 this month, more than €20 below the year-to-date average at €87.99.
As a result of the lower contribution from non-rooms revenues, as well as plummeting rooms revenue, TRevPAR at hotels in Barcelona fell by 16.7 percent year-on-year to €279.67.
Hotels in Barcelona were further hit by rising costs in August, which were led by a 4.8-percentage-point increase in payroll to 24.8 percent of total revenue.
Despite the challenges this month, profit conversion remained strong at 46.9 percent of total revenue.
Profit & Loss Key Performance Indicators – Barcelona (in EUR)
August 2018 v August 2017
RevPAR: 19.5% to €199.00
TrevPAR: -16.7% to €279.67
Payroll: +4.8 pts to 24.8%
GOPPAR: -26.4% to €131.14
Profit per room for year-to-date 2018 at hotels in Barcelona is now 11.8 percent behind the same period in 2017, which is following robust growth in both 2016 (up 9.6 percent) and 2017 (up 8.4 percent).
“2018 has not been an easy year for hotels in Barcelona with profit levels falling in six of the last eight months. Whilst the defence of falling visitor numbers across Spain has been attributed to a shift towards a strategy of developing ‘international tourism of quality,’ the drop in Barcelona could also be due to a backlash following last year’s anti-tourism protests, as well as the political unrest following the illegal independence vote in October, which is when hotel performance levels began to fall away,” said Grove.
When in Rome
Despite escaping the extreme heat, hotels in Rome also struggled in the leisure-led month of August, notwithstanding the city being one of the world’s most popular tourism destinations.
The key issue for hotels in Rome is the decline in year-on-year room occupancy, which fell by 0.5-percentage-points this month to 65.4 percent from a high of 74.9 percent back in August 2015.
The drop impacted the ability of hotels in the Italian capital to drive non-rooms revenue, which this month fell to just 26.7 percent of total revenue compared to 33.3 percent for the year-to-date 2018.
Despite the 2.6-percent increase in RevPAR to €171.90, the decline in non-rooms revenue resulted in hotels in Rome recording a 2.4-percent drop in TRevPAR to €234.69.
Furthermore, rising costs, which included a 1.1-percentage-point increase in payroll to 42.3 percent of total revenue, meant profit conversion at hotels in Rome fell to just 22.1 percent of total revenue.
The challenges faced by Rome hoteliers in recent years is punctuated by the drop in profit per room, which has fallen by almost €20 over the last three years to €51.83 in August 2018 from €71.27 in August 2015.
Profit & Loss Key Performance Indicators – Rome (in EUR)
August 2018 v August 2017
RevPAR: +2.6% to €171.90
TrevPAR: -2.4% to €234.69
Payroll: -1.1 pts to 42.3%
GOPPAR: -11.2% to €51.83
UK
Hotels in the UK recorded a 9.2 percent year-on-year increase in profit per room in August, as warm temperatures lured lodging demand from domestic and international leisure sources.
Profit levels at UK hotels have soared over the summer, with significant year-on-year growth recorded in both July (up 7.2 percent) and August (up 9.2 percent), as the country has basked in well-above-average temperatures.
The growth in GOPPAR this month was driven by volume from the leisure segment, which accounted for 40.6 percent of accommodated roomnights, well above the annual average of 32.1 percent for the 12 months to August 2018.
As well as contributing to the increase in volume, year-on-year growth was also recorded in the achieved rate in the leisure segment, including the individual leisure (up 3.4 percent) and group leisure (up 1.3 percent) sectors.
Overall in the month, hotels in the UK recorded a 2.7-percentage-point increase in room occupancy to a lofty 84.8 percent, as well as a 4.6-percent increase in achieved average room rate to £118.84, driving an 8.0-percent increase in RevPAR for the month to £100.72.
Year-on-year growth was also recorded in non-rooms revenues, including food & beverage (up 2.1 percent) on a per-available-room basis, which contributed to the 5.9-percent increase in TRevPAR to £142.88.
In addition to growth in revenue, payroll as a percentage of revenue fell to 27.7 percent.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
August 2018 v August 2017
RevPAR: +8.0% to £100.72
TrevPAR: +5.9% to £142.88
Payroll: -0.7 pts to 27.7%
GOPPAR: +9.2% to £55.18
As a result of the movement in revenue and costs, GOPPAR grew to £55.18, equivalent to a profit conversion of 38.6 percent of total revenue.
“Whilst the Bank Holiday was a bit of a washout, the warm weather in the UK for the rest of the month played a crucial role in encouraging staycations and fuelling demand for accommodation,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA at HotStats.
“And alongside astute management from UK hoteliers, the month of August has now been transformed from a historically challenging period of trading to a very positive month of profit performance.”
One frustration for UK hoteliers this month will be the volume of bookings via third-party websites, illustrated by the uplift in Rooms Cost of Sales (the HotStats measure of travel agent commissions, reservations fees, GDS fees, third-party fees and internet booking fees), which increased by 8.9 percent year-on-year to £7.50 per available room.
In contrast to the growth in profit for hotels across the UK, properties in proximity to Heathrow Airport suffered a 2.5-percent decline in GOPPAR this month despite London’s largest airport welcoming 7.5 million passengers in August.
Whilst room occupancy at Heathrow hotels increased by 1.7-percentage points this month to 87.7 percent, the prevalence of lower-yielding leisure demand in August meant that achieved average room rate dropped by 0.4 percent year-on-year to £69.87. This was the lowest rate recorded at Heathrow hotels since August 2016 when it fell to £68.59.
Despite the low average room rate, RevPAR at hotels at Heathrow Airport increased by 1.6 percent in August to £61.28, which contributed to the 0.7-percent increase in TRevPAR to £86.06.
In addition to the uplift in revenue, payroll as a percentage of revenue dropped to 30.9 percent.
However, rising unallocated expenses, which included a lift in Admin & General (up 8.6 percent), Sales & Marketing (up 2.0 percent) and Property & Maintenance (up 11.3 percent) on a per-available-room basis, wiped out the growth in revenue and led to the drop in profit per room to £25.74.
This is equivalent to a profit conversion of 29.9 percent of total revenue and marked a fourth month of profit decline in what has been a challenging year so far for hotels at Heathrow Airport.
“The drop in profit at Heathrow hotels this month is somewhat surprising considering the volume of traffic through the airport, particularly as it was on the back of the busiest day ever for the airport on July 29,” said Grove. “However, the decline is illustrative of the endemic cost challenges facing hotels in the UK at the moment, which meant the news of inflation creeping up to 2.4 percent was even less welcome.”
Profit & Loss Key Performance Indicators – Heathrow Airport (in GBP)
August 2018 v August 2017
RevPAR: +1.6% to £61.28
TrevPAR: +0.7% to £86.06
Payroll: -0.5 pts to 30.9%
GOPPAR: -2.5% to £25.74
Meanwhile, August represented peak in performance for hotels in Edinburgh as the city hosted the ever-popular Fringe Festival, which this year broke the previous record of at least 2.8 million tickets sold for more than 3,500 shows, according to the Edinburgh Festival Fringe Society.
Hotels leveraged the volume of demand to the city, achieving an average room rate to £202.64 in August, almost £70 above the year-to-date figure of £133.59. This contributed to the 4.3-percent increase in RevPAR to £192.08.
Whilst declines were recorded in non-rooms revenues, including a 0.4percent drop in food and beverage revenue, TRevPAR at hotels in Edinburgh increased by 3.2 percent year-on-year to £236.54.
In addition to revenue growth, payroll as a percentage of revenue was a palatable 17.4 percent, allowing hotels in the Scottish capital to drive a GOPPAR increase of 4.1 percent to £134.62.
Edinburgh hotels recorded a profit conversion of a robust 56.9 percent of total revenue.
Profit & Loss Key Performance Indicators – Edinburgh (in GBP)
August 2018 v August 2017
RevPAR: +4.3% to £192.08
TRevPAR: +3.2%to £236.54
Payroll: -0.1 pts to 17.4%
GOPPAR: +4.1% to £134.62
USA
While RevPAR and GOPPAR levels exceeded the previous annual low recorded at hotels in the U.S. back in January, failure to drive non-rooms revenue on the back of high occupancy levels drove TRevPAR down to an annual low.
Overall, August will be noted as another positive month of performance for hotels in the U.S. with year-on-year growth recorded across all top-line revenues, including rooms (up 2.5 percent), food & beverage (up 5.3 percent) and conference & banqueting (up 7.3 percent) on a per-available-room basis.
And as a result of the upward movement across all revenue departments, TRevPAR at hotels in the U.S. increased by 3.6 percent.
In addition, and despite a 0.5-percentage-point increase in labor to 38.1 percent of total revenue, profit per room at hotels in the U.S. increased by 4.5 percent, to $74.99.
However, August is a unique month of performance, as the shift in demand dynamics means that hotels in the U.S. have to alter strategy to maintain performance levels.
This includes driving occupancy, which was at 78.5 percent in August, only slightly below the year-to-date figure at 78.7 percent.
In contrast, at $190.60 this month, achieved average room rate was almost $18 below the average in the eight months to August 2018 at $207.96.
Furthermore, and despite the premium room occupancy levels, non-rooms revenue levels at hotels in the U.S. in August came in at $77.07, well below year-to-date average of $96.25.
This was primarily due to the significantly lower contribution from the F&B department at $58.32 per available room, compared to $76.95 for year-to-date 2018.
As a result of the lower contribution from non-rooms revenue this month, TRevPAR at hotels in the U.S. was at its lowest level in 2018, at $226.75, behind the previous low recorded in January at $232.20.
Profit & Loss Key Performance Indicators – U.S. (in USD)
August 2018 v August 2017
RevPAR: +2.5% to $149.68
TRevPAR: +3.6% to $226.75
Payroll: +0.5 pts to 38.1%
GOPPAR: +4.5% to $74.99
“Capturing volume in August never seems to be an issue for hotels in the U.S. as demand levels soar, fuelled by domestic and international travel patterns. However, with a higher proportion of demand from leisure sources, the ability to drive premium average room rates is challenged,” said Pablo Alonso, CEO of HotStats.
“Furthermore, the resistance to rate is reflected in the overall leisure consumer spend. While this does not suggest that the overall spend for leisure visitors is less than commercial visitors, it does suggest that spend on accommodation is not the priority and much of this ancillary expenditure takes place outside of the hotel in local restaurants, bars and at tourist attractions.”
In contrast to the performance of hotels in the U.S. overall, properties in Los Angeles performed well in the month of August, led by a peak in the number of passengers handled at Los Angeles International Airport (LAX).
This is further illustrated by profit per room recorded at hotels in Los Angeles in August reaching $91.57. While this is slightly off the peak in June 2018, at $102.12, it is above the year-to-date figure of $91.27.
The robust performance at hotels in Los Angeles this month was led by premium room-occupancy levels, which hit 90.4 percent, a high this year, and a 1.1-percentage points increase on the same period in 2017.
However, the growth in room occupancy was not sufficient to offset the drop in rate, which fell by 1.9 percent to $209.06 and contributed to the 0.7-percent drop in RevPAR to $188.94.
Furthermore, with demand in August led by the leisure segment, the contribution from non-rooms revenue departments at hotels in Los Angeles fell to just 25.5 percent of total revenue, compared to the year-to-date contribution of 30.7 percent.
Despite this, robust year-on-year growth in non-rooms revenue, which included a 5.4-percent increase in F&B on a per-available-room basis, fuelled a 1.2-percent increase in TRevPAR to $253.79.
Yet, GOPPAR levels fell as hotels in Los Angeles continue to suffer the impact of rising costs, which this month were led by the 1.1-percentage-point lift in labor to 36.1-percent of total revenue, a likely product of ongoing increases in the state minimum wage.
Profit & Loss Key Performance Indicators – Los Angeles (in USD)
August 2018 v August 2017
RevPAR: -0.7% to $188.94
TRevPAR: +1.2% to $253.79
Payroll: +1.1 pts to 36.1%
GOPPAR: -1.8% to $91.57
GOPPAR growth at hotels in Los Angeles has stalled some since the positive increase in 2016 (up 10.7 percent), with a decline of 2.0 percent recorded in 2017, and the challenges being faced in 2018 resulting in a year-to-date drop of 0.8-percent.
“Visitor numbers to Los Angeles have been strong in recent years, hitting 48.3 million visitors in 2017, an increase of almost 10 million from the 38.5 million recorded in 2010,” said Alonso.
“However, this does not seem to have directly translated into hotel performance, which may be due to recent increases in Los Angeles’ inventory.”
Properties in Denver also performed well in August, recording a 5.7-percent year-on-year uplift in profit per room to $87.73, which was second only to the GOPPAR recorded in June at $91.60, illustrating the strength of demand in the Colorado capital during the summer months.
The bottom-line growth this month was driven by top-line increases, which include a 1.8-percent increase in rooms revenue in spite of a 2.3-percentage point drop in room occupancy, to 91 percent, as well as declines in non-rooms revenues.
Profit & Loss Key Performance Indicators – Denver (in USD)
August 2018 v August 2017
RevPAR: +1.8% to $154.14
TRevPAR: +1.5% to $217.46
Payroll: -0.2 pts to 31.1%
GOPPAR: +5.7% to $87.73
Nevertheless, hotels in Denver successfully recorded a 1.5-percent increase in TRevPAR in August to $217.46. The increase in revenue was further supported by a 0.2-percentage point saving in labor costs, to 31.1 percent of total revenue, with profit conversion recorded at a heady 40.3 percent of total revenue
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.
