MIDDLE EAST & AFRICA
Following a very challenging period of trading in recent years, year-on-year growth in revenue and profit at hotels in the Middle East & Africa in January represented a strong start to 2018, according to the latest worldwide poll of full-service hotels from HotStats.
Whilst hotels in the Middle East & Africa suffered a 3.2% year-on-year decline in achieved average room rate in January, to $182.33, this was more than offset by the 3.3 percentage point increase in room occupancy, to 69.1%.
As a result of the movement in volume and price, RevPAR growth at hotels in the region was recorded at 1.6% for the month, to $125.91, which was 7.7% above the RevPAR average ($116.92) for the region in the rolling 12-months to January 2018.
In addition to the increase in Rooms Revenue, hotels in the Middle East & Africa successfully recorded year-on-year growth in Non-Rooms Revenues, which included an increase in Food and Beverage (+2.0%), Conference & Banqueting (+4.9%) and Leisure (+5.2%), on a per available room basis.
The growth across all revenue centres fuelled a 1.4% increase in TrevPAR in January, to $207.75, which is a positive result when compared to the 2.3% decline in Total Revenue suffered by hotels in the region in 2017.
Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)
January 2018 v January 2017
RevPAR: +1.6% to $125.91
TrevPAR: +1.4% to $207.75
Payroll: -1.0 pts to 26.2%
GOPPAR: +5.2% to $87.54
In addition to the growth in TrevPAR, profit levels at hotels in the Middle East & Africa were further boosted by a 1.0-percentage point saving in Payroll, which fell to 26.2% of total revenue.
As a result of the movement in revenue and costs, GOPPAR at hotels in the region increased by 5.2% in January, to $87.54, which was equivalent to a profit conversion of 42.1% of total revenue.
The increase this month is a positive start to 2018 following consecutive years of falling profit per room at hotels in the Middle East & Africa in 2015 (-10.1%), 2016 (-11.6%) and 2017 (-5.2%).
“Trading conditions for hotels in the Middle East & Africa have been very challenging in recent years as the oil crisis, which began in earnest in 2014, led to a reduction in energy trade-related demand as well as reduced government and private sector spending across the region.
Following the crash, oil prices remained relatively low until the fourth quarter of 2017 when they surged to just above $64 per barrel, which had a positive knock-on effect on demand levels. This recovery seems to have continued into January; however, hotels in the region have a lot of ground to make up after several years of decline,” said Pablo Alonso, CEO of HotStats.
Hotels in Sharm El Sheikh were amongst the top performing in January, recording a 111.1% increase in profit per room on the back of a robust increase in revenue and cost savings.
The growth in revenue was led by a 39.7% increase in RevPAR, as hotels in the Egyptian resort recorded significant growth in both room occupancy (+11.8 percentage points) and achieved average room rate (+5.1%).
Profit & Loss Key Performance Indicators – Sharm El Sheikh (in USD)
January 2018 v January 2017
RevPAR: +39.7% to $19.68
TrevPAR: +44.3% to $34.32
Payroll: -4.9 pts to 26.2%
GOPPAR: +111.1% to $8.40
Whilst RevPAR at hotels in Sharm El Sheikh in January remained comparatively low, at just $19.68, in the rolling 12-month average, it was the highest level recorded in this measure since the bombing of the Russian charter flight from the Egyptian resort to St Petersburg in October 2015. And represents a significant recovery from a RevPAR low of just $2.56 recorded in June 2016.
“Whilst the Russian government gave permission for flights to Sharm El Sheik to resume in January 2018, it is likely to be some time before tour operators are in a position to start bringing tourists back to the resort. Aeroflot will be one of the first to resume flights, which are scheduled to commence at the end of February.
If, as hoped, other nations follow suit, it could be the catalyst for a significant recovery in revenue and profit performance for hotels in Sharm El Sheikh in 2018,” said Pablo Alonso, CEO of HotStats.
The growth in top line revenues, as well as cost savings, which included a 4.9-percentage point drop in Payroll, to 26.2% of total revenue, contributed to GOPPAR increasing to $8.40 in January, albeit from a very low base of just $3.98 during the same period in 2017.
In contrast to the positive performance of hotels in Sharm El Sheikh, hotels in Dubai suffered a 1.3% year-on-year drop in profit per room as growth in Rooms Revenue was wiped out by declining Non-Rooms Revenues and rising costs.
For hotels in the UAE’s most populous city, the growth in RevPAR this month was entirely driven by a 1.0-percentage point increase in room occupancy, to 86.9%, and in spite of a 1.1% decline in achieved average room rate, to $272.15, as hotels in Dubai continue to struggle with the downward pressure on rate.
Despite the uplift in volume, hotels in Dubai suffered a decline in Non-Rooms Revenues, including a 2.6% decline Food & Beverage Revenue (-2.6%) on a per available room basis, which contributed to the 0.9% drop in TrevPAR, to $369.62.
The decline in revenue levels was further exacerbated by rising costs, which included a 0.5-percentage point increase in Payroll, to 22.1% of total revenue. As a result, GOPPAR at hotels in Dubai fell by 1.5% year-on-year to $176.43 for the month of January.
Despite the year-on-year drop, January remains a strong month of performance for hotels in Dubai, with profit conversion recorded at 47.7% of total revenue, against a rolling average of 39.6% in the 12-months to January 2018.
Profit & Loss Key Performance Indicators – Dubai (in USD)
January 2018 v January 2017
RevPAR: +0.1% to $236.53
TrevPAR: -0.9% to $369.62
Payroll: +0.5 pts to 22.1%
GOPPAR: -1.5% to $176.43
EUROPE
Robust revenue growth and cost savings helped hotels in Europe record a 16.0% year-on-year increase in profit per room in January, signalling a very strong start to 2018.
The 5.8% year-on-year growth in RevPAR recorded by hotels in Europe in January, to €82.70, was due to a 1.4-percentage point increase in room occupancy, to 58.2%, as well as a 3.3% increase in average room rate, to €142.21.
The growth in both volume and price at hotels in the region spurred increases in in Non-Rooms Revenues, including Food & Beverage (+3.4%) and Conference & Banqueting (+4.6%) on a per available room basis, which contributed to the 4.9% increase in TrevPAR for the month, to €131.55.
Whilst hotels in Europe typically record a TrevPAR low in January, the uplift this period represents a ninth consecutive month of year-on-year Total Revenue growth for hotels in the region, suggesting its hoteliers are enjoying a purple patch of performance.
In addition to the growth in volume, average room rate in Europe was driven by increases in rate in the Corporate (+2.3%), Individual Leisure (+1.5%) and Group Leisure (+14.6%) segments, illustrating that the positive performance in the region is being supported by a broad base of demand.
Profit & Loss Key Performance Indicators – Europe (in EUR)
January 2018 v January 2017
RevPAR: +5.8% to €82.70
TrevPAR: +4.9% to €131.55
Payroll: -0.9 pts to 41.5%
GOPPAR: +16.0% to €29.42
As well as the increase in revenue, hotels in Europe successfully slashed costs, which included a 0.9-percentage point decrease in Payroll, to 41.5% of total revenue, fuelling a 16.0% year-on-year increase in GOPPAR to €29.42. This is equivalent to a profit conversion of 22.4% of total revenue.
Hotels in Vienna followed a similar trend to the region this month, albeit in spite of a lower recorded revenue, but with the benefit of much greater cost savings.
A 1.9% RevPAR increase, to €81.04, at hotels in Vienna was due to a 0.5-percentage point increase in room occupancy, to a lowly 55.4%, and supported by a 1.0% increase in achieved average room rate, to €146.35.
The increase in rate in January was achieved in spite of declining room rates in the Corporate (-2.6%) and Residential Conference (-6.8%) segments, but was driven by increases in the Individual Leisure (+0.8%) and Group Leisure (+4.3%) segment rates.
Profit & Loss Key Performance Indicators – Vienna (in EUR)
January 2018 v January 2017
RevPAR: +1.9% to €81.04
TrevPAR: +5.5% to €145.50
Payroll: -0.4 pts to 51.0%
GOPPAR: +46.6% to €12.46
“In line with the growth across Europe, hotels in Vienna have benefited from an uplift in demand from the leisure segments this month.
The investment by Vienna’s local government in cultural and tourist attractions in recent years has broadened the offering in the Austrian capital and generated a record number of bednights for the city, which swelled to 15.5 million in 2017.
This has been to the significant benefit of local hoteliers who have had a strong start to 2018 following the positive period of trading in 2017,” said Pablo Alonso, CEO of HotStats.
In addition to the 1.9% year-on-year growth in Rooms Revenue, hotels in Vienna benefit from a stronger contribution from Non-Rooms Revenues, which comprised 44.4% of total revenue in January, compared to 37.1% across Europe.
The strength of the growth in Non-Rooms Departments contributed to the 5.5% increase in TrevPAR this month, to €145.50.
Profit levels at hotels in Vienna were further boosted by cost savings, which included a 0.4-percentage point saving in Payroll to 51.0% and contributed to the 46.6% year-on-year increase in profit per room, to €12.46.
Despite the uplift in GOPPAR in January, profit conversion at hotels in Vienna remained comparatively low at just 8.6% of total revenue.
Hotels in Moscow also benefited from a strong start to the year, recording a 16.7% increase in profit per room, which was on the back of a robust increase in revenue levels, as well as cost savings.
The uplift in revenue at hotels in the Russian capital in January was driven by a 6.4-percentage point year-on-year increase in room occupancy, to 62.4%, which fuelled a 7.5% increase in RevPAR, to €56.20. The growth in Rooms Revenue was in spite of a 3.4% drop in achieved average room rate, to €90.09.
The growth in volume fuelled an increase in Non-Rooms Revenues at hotels in Moscow, illustrated by the 3.3% year-on-year increase in Food and Beverage Revenue, on a per available room basis, to €26.61, supporting a 6.2% increase in TrevPAR, to €87.50.
“Although Russia is well on the road to recovery following the recession which began in 2014 as a result of the rouble collapsing, the drop in crude oil prices and economic sanctions, demand remains resistant to price increases and top and bottom line growth at hotels in Moscow is being almost entirely driven by an increase in volume,” added Pablo.
Profit & Loss Key Performance Indicators – Moscow (in EUR)
January 2018 v January 2017
RevPAR: +7.5% to €56.20
TrevPAR: +6.2% to €87.50
Payroll: -1.3 pts to 35.0%
GOPPAR: +16.7% to €26.57
In addition to the growth in revenue levels, Moscow hoteliers managed to cut costs, which included a 1.3-percentage point reduction in Payroll levels, to 35.0% of total revenue.
This contributed to the increase in GOPPAR to €26.57, equivalent to a profit conversion of 30.3% of total revenue. Whilst this was well below the rolling 12-month average profit conversion for hotels in Moscow, at 44% of total revenue, it was one of the strongest profit conversions recorded in the region in January.
UK
Hotels in the UK faced a challenging start to the year as escalating costs, particularly in payroll, completely wiped out the revenue growth recorded this month and led to a 3.9% year-on-year decline in profit per room.
Growth in RevPAR in January was slight, at just 0.6%, to £66.28, and was entirely as a result of a 0.8% increase in achieved average room rate, to £102.58, which offset the 0.2-percentage point drop in room occupancy to 64.6%.
And despite the drop in volume, hotels in the UK successfully recorded increases in Non-Rooms Revenues, including Food and Beverage (+1.1%) and Conference and Banqueting (+6.0%), which contributed to the 0.8% increase in TrevPAR, to £103.86.
However, hotels in the UK struggled to turn a profit in any department, illustrated by the 0.5% decline in profit per room recorded in the Rooms Department, to £44.86. As the most profitable department of the hotel, Rooms is the stalwart of the operation; however, increases in Rooms Expenses (+6.8%) and Rooms Payroll (+3.1%), wiped out the increase in Rooms Revenue and led to the January profit drop.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
January 2018 v January 2017
RevPAR: +0.6% to £66.28
TrevPAR: +0.8% to £103.86
Payroll: + 0.5 pts to 35.3%
GOPPAR: -3.9% to £26.10
Overall, looking at the operation overall, the growth in TrevPAR was cancelled out by rising costs, which included a 0.5 percentage point increase in Payroll, to 35.3% of total revenue, as well as a 0.4-percentage point increase in ‘Overhead’ costs.
As a result of the movement in revenue and costs, GOPPAR at hotels in the UK fell by 3.9% year-on-year to £26.10 in January. This was equivalent to a profit conversion of 25.1% of total revenue and well below the average for the rolling 12 months at 38.5% of revenue.
“January was the sixth consecutive month in which hotels in the UK have recorded a year-on-year decline in room occupancy. I’m not sure it’s time to start panicking just yet as the drop has been fairly minor. However, with a record number of additions to supply anticipated in London and the Regions in 2018, margins really need to be monitored.
Moreover, escalating Payroll costs should be a key concern for hotel owners, operators and investors, with further increases in the National Living Wage set for April 2018 and net migration levels falling to their lowest level since records began, stifling a major source of labour in the hospitality industry,” said Pablo Alonso, CEO of HotStats.
In contrast to the UK overall, hotels in Cardiff successfully recorded an increase in room occupancy of +2.6-percentage points to 67.1%, but it was at the expense of a 1.9% decline in achieved average room rate, to £69.00, which was the lowest rate recorded at hotels in Cardiff since January 2016.
During periods of low demand, such as January, and outside of the key events calendar in the city and at the Principality Stadium, room rate at hotels in Cardiff is highly price sensitive, illustrated by the rate recorded this month in the Corporate (£63.61) and Leisure (£64.77) segments at the hotels polled.
And despite recording a reasonable level of growth in RevPAR, profit per room at hotels in Cardiff also succumbed to rising costs in January.
Profit & Loss Key Performance Indicators – Cardiff (in GBP)
January 2018 v January 2017
RevPAR: +2.1% to £46.32
TrevPAR: +1.1% to £73.57
Payroll: +0.9 pts to 41.2%
GOPPAR: -1.6% to £9.02
In addition to the drop in achieved average room rate, Non-Rooms Revenues at hotels in the Welsh capital fell and contributed to TrevPAR growth being tempered to an increase of just 1.1%, to £73.57.
As a result of mounting costs, which were led by a 0.9-percentage point increase in Payroll, to 41.2% of total revenue, profit per room at hotels in Cardiff fell by 1.6% year-on-year in January, to just £9.02, equivalent to a profit conversion of only12.3% of total revenue.
Similar dynamics were responsible for profit per room plummeting at hotels in Newcastle in January, with properties in the North East city also failing to record an increase in revenue.
Challenged by the addition of almost 1,000 rooms to the market over the last three years, room occupancy at hotels polled in Newcastle in January dropped by 1.6-percentage points year-on-year, to just 60.7%, which was the lowest occupancy recorded in the market since January 2016.
The drop in room occupancy was sufficient to entirely cancel out the 0.9% increase in achieved average room rate, to £67.94, and as a result, RevPAR in Newcastle dropped by 1.7% to £41.26.
Profit & Loss Key Performance Indicators – Newcastle (in GBP)
January 2018 v January 2017
RevPAR: -1.7% to £41.26
TrevPAR: -2.3% to £66.47
Payroll: +0.1 pts to 39.4%
GOPPAR: -19.8% to £9.00
Further declines in Non-Rooms Revenue meant TrevPAR at hotels in Newcastle dropped by 2.3% year-on-year to £66.47, which, again, was the lowest monthly level recorded in this measure since January 2016.
The falling revenue levels at Newcastle hotels were further exacerbated by increasing costs, which included a 0.1-percentage point increase in Payroll to 39.4% of total revenue. In addition, hotels in Newcastle recorded a decline in a number of Overhead costs, including Utilities, which increased by 0.6-percentage points for the month, to 6.3% of revenue.
The escalating costs, on top of declining revenues meant profit per room for hotels in Newcastle fell by 19.8% to just £9.00 in January, equivalent to 13.5% of total revenue, which was just 34.4% of the rolling 12-month GOPPAR average at £26.14.
USA
Profit per room at hotels in the USA dropped by 0.5-percent in January, which was in spite of an increase in revenues across all departments.
It was a relatively muted start to 2018 for hotels in the USA which recorded a 0.6-percent increase in RevPAR to $138.17, from $137.33 during the same period in 2017.
The growth in RevPAR was due to an increase in both room occupancy (+0.2-percentage points) to 67.9-percent, as well as a 0.3-percent increase in achieved average room rate, to $203.42.
In addition to the growth in Rooms revenue, increases across Non-Rooms departments in January, including Food and Beverage Revenue (+2.9-percent), enabled hotels in the USA to record TrevPAR growth at 1.8-percent for the month, to $229.59.
The growth in headline performance levels at hotels in the USA in January was primarily led by year-on-year increases in the Conference segment. This was illustrated by the (+3.0-percent) increase in revenue in the Conference and Banqueting department, as well as the 2.5-percent increase in achieved rate in the Residential Conference segment to $238.34, which was compared to declines in rate in the Corporate (-2.2-percent) and Leisure (-1.0-percent) segments this month.
Profit & Loss Key Performance Indicators – USA (in USD)
January 2018 v January 2017
RevPAR: +0.6% to $138.17
TrevPAR: +1.8% to $229.59
Payroll: +0.3 pts to 39.3%
GOPPAR: -0.5% to $73.03
However, the growth in top line performance at hotels in the USA in January was cancelled out by a 0.3-percentage point increase in Labour costs to 39.3-percent of total revenue as well as an uplift in Overhead costs.
As a result, GOPPAR at hotels in the USA fell by 0.5-percent this month to $73.03, which was equivalent to a profit conversion of 31.8-percent of total revenue.
In contrast to hotels across the USA, one year on from the peak top and bottom line performance recorded at hotels in Washington DC in January 2017, which were driven by the attendance at the inauguration of President Trump, revenue and profit levels fell back down this month.
Although room occupancy remained relatively robust, for January, at 59.0-percent, achieved average room rate in the city plummeted by 37.1-percent, to $189.23; and despite being well behind the achieved rate in January 2017 ($301.01), it remained above the rate recorded during the same period in 2016, at $181.08.
Profit & Loss Key Performance Indicators – Washington DC (in USD)
January 2018 v January 2017
RevPAR: -39.7% to $111.62
TrevPAR: -31.6% to $171.21
Payroll: +18.5 pts to 61.0%
GOPPAR: -87.2% to $10.11
In addition to the drop in Rooms Revenue, falling Non-Rooms Revenues contributed to the 31.6-percent year-on-year decline in TrevPAR at hotels in Washington DC in January, to $171.21.
Albeit expected following the unique events of this time last year, Labor costs at hotels in the capital sky rocketed this month, by +18.5-percentage points, to 61.0-percent of total revenue, further exacerbating the decline in revenue.
“This month was always going to look bad for hotels in Washington DC, after the benefit of the inauguration this time last year. And performance was certainly not helped by Congress being shut down for several days, as well as an extended cold snap which meant the city suffered some of the lowest temperatures on record,” added Pablo.
As a result of the movement in revenue and costs, profit per room at hotels in Washington DC fell by 87.2-percent year-on-year, to just $10.11, equivalent to a profit conversion of just 5.9-percent of total revenue.
Whilst Miami also felt the cold snap for a few days, the more temperate climate meant that room occupancy levels for January remained strong, at 83.9-percent.
In addition, RevPAR levels were amongst the highest recorded in the last 12 months following an 8.5-percent year-on-year increase to $185.34, which was driven by an 8.9-percent increase in achieved average room rate to $220.94.
The bumper month of Rooms Revenue performance for hotels in Miami was supported by year-on-year increases in Non-Rooms Revenues, including Food and Beverage (+13.5-percent) and Conference and Banqueting (+29.5-percent), which contributed to the 9.9-percent increase in TrevPAR this month, to $267.67.
Furthermore, Miami was one of very few hotel markets to buck the trend of escalating Labour costs in January, recording a 1.9-percentage point drop in this measure, to 27.8-percent of total revenue.
As a result, at $120.98, GOPPAR at hotels in Miami was 16.5-percent ahead of the same period in 2016 and 60-percent above the rolling 12-month average, at $75.57, once again illustrating the strength of demand in South Florida during this time of year.
Profit & Loss Key Performance Indicators – Miami (in USD)
January 2018 v January 2017
RevPAR: +8.5% to $185.34
TrevPAR: +9.9% to $267.67
Payroll: -1.9 pts to 27.8%
GOPPAR: +16.5% to $120.98
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.
