MIDDLE EAST & AFRICA
GOPPAR at hotels in the Middle East & Africa dropped to a new low of $34.70 in July as temperatures in the region soared and demand levels lagged, according to the latest worldwide poll of full-service hotels from HotStats.
The challenges for hotels in the Middle East & Africa continued in July, as profit levels foundered to a record low.
This was the fourth month in a row in which year-on-year profit levels at hotels in the region have fallen, a disappointment following a relatively positive first quarter of 2018.
GOPPAR has now dropped by almost 30% in the last 36 months to $73.08 in the 12 months to July 2018, from $94.53 in the 12 months to July 2015.
As in June, hotels in the Middle East & Africa successfully recorded an increase in RevPAR, which grew by 1.6% this month to $86.55. However, this was dampened by falling non-rooms revenues, as well as rising costs, which led to the drop in GOPPAR.
Non-rooms revenues accounted for 42.5% of all revenues this month and despite recording a drop in food & beverage (-0.9%) and conference & banqueting (-6.3%) revenue on a per available room basis, TrevPAR at hotels in the Middle East & Africa increased by 0.5% to $150.46.
However, rising costs, which included a 0.6-percentage-point increase in payroll to 35.2% of total revenue, as well as a 0.6-percentage-point uplift in overheads to 34.4% of total revenue, cancelled out the growth in total revenue.
As a result of the movement in revenue and costs this month, profit conversion at hotels in the Middle East & Africa was recorded at just 23.1% of total revenue and fell to less than half of the year-to-date 2018 GOPPAR figure at $70.31.
Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)
July 2018 v July 2017
RevPAR: +1.6% to $86.55
TrevPAR: +0.5% to $150.46
Payroll: +0.6 pts to 35.2%
GOPPAR: -2.2% to $34.70
Achieved average room rate remains a test for hotels in the region, falling by 2.6% this month to a new low of $138.03, which represented the eleventh consecutive month of year-on-year decline in this measure.
Although hotels in the Middle East & Africa successfully recorded a 1.0% increase in achieved rate in the group leisure segment this month, declines were recorded across all other segments, including Best Available Rate (-6.0%), corporate (-7.5%), residential conference (-0.4%) and individual leisure (-1.0%), suggesting this is a demand-wide issue.
The challenges in rate this month were in contrast to room occupancy, which increased by 2.5-percentage points to 62.7%, marking a sixth month of year-on-year volume growth so far in 2018.
“Whilst there have been some green shoots in top-line performance at hotels in the region in the last few months, much to the disappointment of owners and operators, this has not reached the bottom line,” said Pablo Alonso, CEO of HotStats.
“This is understandable as the drop in profit levels at hotels in the Middle East & Africa has been unrelenting for such an extended time period that at this stage it is hard for management to cut any more costs whilst maintaining services and standards.”
Hotels on the island of Mauritius shared a similar profit-and-loss fate as the wider Middle East & Africa region this month, suffering a 19.8% year-on-year decline in profit per room, in spite of recording a 3.9% increase in RevPAR.
Whilst achieved average room rate growth on the island shows no signs of slowing, having increased by 20.5% for year-to-date 2018 following the 10.7% increase in 2017, it’s a different story for room occupancy, which has fallen by 2.1-percentage points so far in 2018 following a bumper period of volume growth in 2017, when room occupancy levels increased by 7.4-percentage points year-on-year.
For the month, the RevPAR uplift was a result of a 9.1% year-on-year increase in achieved average room rate to $200.66, which offset the 3.6-percentage-point decline in room occupancy, which fell to 74.1%.
And despite a decline in non-rooms revenues, which included a drop in food & beverage (-6.0%), conference & banqueting (-10.0%) and leisure (-9.2%), TRevPAR for hotels in Mauritius increased by +0.7% in July to $261.06.
However, in line with the region, escalating costs, which included a 1.6-percentage point increase in payroll to 31.9% of total revenue, cancelled out the growth in TRevPAR and led to year-on-year GOPPAR levels dropping to $46.71 this month.
Despite the decline in July, profit per room at hotels in Mauritius has increased by 9.8% for year-to-date 2018 to $90.73 and continued the profit growth recorded in 2016 (+13.2%) and 2017 (+26.5%).
Profit & Loss Key Performance Indicators – Mauritius (in USD)
July 2018 v July 2017
RevPAR: +3.9% to $148.69
TrevPAR: +0.7% to $261.06
Payroll: +1.6 pts to 31.9%
GOPPAR: -19.8% to $46.71
“Whilst room occupancy levels have declined in 2018, the ongoing growth in visitor numbers and current moratorium on development continues to drive growth in profit performance for hotels in Mauritius,” added Alonso.
In contrast to the drop in profit at hotels across the region, properties in the leisure destination of Sharm El Sheikh recorded a positive month of GOPPAR growth in July, which contributed to the recovery in top- and bottom-line performance after the challenges of recent years.
Profit & Loss Key Performance Indicators – Sharm El Sheikh (in USD)
July 2018 v July 2017
RevPAR: +17.9% to $30.23
TrevPAR: +15.8% to $48.23
Payroll: -0.1 pts to 20.5%
GOPPAR: +29.8% to $13.78
Growth in the Egyptian resort was led by a 17.9% year-on-year increase in RevPAR this month, which hit $30.23 and was a recent high, driven by growth in both room occupancy (+2.8-percentage points) and achieved average room rate (+13.1%) to $43.32.
The growth in rooms revenue was supported by increases in non-rooms revenue, which contributed to the 15.8% year-on-year increase in TRevPAR to $48.23.
In addition to the uplift in revenues, the 0.1-percentage-point saving in payroll, to 20.5% of total revenue, helped hotels in Sharm El Sheikh record a +29.8% in profit per room, albeit to a rather low $13.78 per available room.
EUROPE
Hotels in Europe recorded a 16.9% year-on-year increase in profit per room in July primarily fuelled by a 11.3% increase in achieved average room rate.
Profit per room at hotels in Europe soared once again as the World Cup continued in Russia and strong demand from the leisure segment helped fuel increases in top-line performance across the region.
Whilst GOPPAR levels in July were off the high recorded in June, they remained well ahead of the year-to-date figure at €62.47 per available room, and represented a second consecutive month of outstanding profit growth for hotels in the region after a shaky start to the year.
The growth in profit was led by a 11.3% year-on-year increase in RevPAR, which grew to €143.86 and was driven by a 20th consecutive month of year-on-year growth in achieved average room rate to €183.20. Room occupancy was unmoved at 78.5%.
On a rolling 12-month basis, consistent growth has enabled achieved average room rate at hotels in Europe to increase by 6.9% over the last 20 months to €162.99 in the 12 months to July 2018 from €152.46 in the 12 months to November 2016.
Whilst profit growth this month was primarily led by a year-on-year increase in rooms revenue, non-rooms revenue was mixed, as a 1.9% increase in food & beverage revenue was stalled by declines in conference & banqueting (-2.4%) and leisure (-8.0%) revenue on a per-available-room basis.
Despite the mixed performance across the various departments, TRevPAR at hotels in Europe increased by 8.6% year-on-year to €200.24.
Profit & Loss Key Performance Indicators – Europe (in EUR)
July 2018 v July 2017
RevPAR: +11.3% to €143.86
TrevPAR: +8.6% to €200.24
Payroll: -1.8 pts to 28.8%
GOPPAR: +16.9% to €83.70
The positive revenue growth was coupled with cost savings, which included a 1.8-percentage-point decrease in payroll to a 28.8% of total revenue, as well as a 0.6-percentage-point drop in overheads.
Profit levels remained heady in July at €83.70 per available room, which was equivalent to a profit conversion of 41.8% of total revenue.
The robust demand levels were led by the leisure and Best Available Rate segments, which accounted for 57.2% of accommodated roomnights, which is well above the average of 49.0% for the 12 months to July 2018.
“In addition to buoyant demand levels associated with the highly successful World Cup in Russia, temperatures soared across Europe this month signalling that the summer holidays were truly in full swing,” said Pablo Alonso, CEO of HotStats.
“The positive performance in July is welcome evidence for owners and operators across the region of a robust leisure segment to complement the already stalwart commercial sector, which should enable a continued uplift in profit levels.”
In line with the performance of the Russian capital one month earlier, hotels in St. Petersburg benefited from a highly successful period of trading in July as a result of demand associated with the FIFA World Cup 2018. However, the data suggest that hotels in the city failed to fully capitalise on the opportunity.
In contrast to the triple-digit growth in profit recorded by hotels in Moscow in June, hotels in St. Petersburg recorded a year-on-year increase of just 25.5% to €91.42.
And whilst the growth in profit was led by a 61.9% year-on-year increase in achieved average room rate, which grew to €159.58, room occupancy at hotels in Russia’s second-largest city plunged by 17.0-percentage points to 72.1%. As a result, the year-on-year RevPAR increase was more muted at +30.9%.
Furthermore, hotels in St. Petersburg recorded an 80.6% increase in rooms cost of sales (the HotStats measure of travel agent commissions, reservations fees, GDS fees, third-party fees and internet booking fees) this month, which increased to 4.9% of rooms revenue and meant the profit increase in the Rooms department was well below the RevPAR growth for the month.
In addition, a decline was recorded across all non-rooms revenues, led by a 12.2% drop in food & beverage revenue, which meant year-on-year TRevPAR growth was recorded at +19.4% to €142.74.
Despite the missed opportunities, profit conversion at hotels in St. Petersburg was recorded at 64.0% of total revenue this month, aided by a 1.4-percentage-point saving in payroll, which fell to just 13.0% of total revenue.
“St. Petersburg hosted three fixtures of the 2018 World Cup in July and the significant increase in demand for accommodation in the city should have been equalled in the profit growth at its hotels. However, much to the disappointment of owners and operators, this opportunity does not seem to have been fully recognized,” added Alonso.
Profit & Loss Key Performance Indicators – St. Petersburg (in EUR)
July 2018 v July 2017
RevPAR: +30.9% to €114.98
TrevPAR: +19.4% to €142.74
Payroll: -1.4 pts to 13.0%
GOPPAR: +25.5% to €91.42
In Southern Europe, and in line with the buoyant economic profile of the city, hotels in Lisbon recorded another month of positive top- and bottom-line performance in July, punctuated by a 19.5% year-on-year increase in profit per room to €54.69.
The growth in profit per room was driven by a 15.1% year-on-year increase in RevPAR, which was entirely led by an 18.5% increase in achieved average room rate to €34.97, as room occupancy fell by -2.3-percentage points to 77.7%.
This helped to drive a 12.1% increase in TrevPAR to €138.72, which was recorded in spite of declining non-rooms revenue, including food & beverage (-14.2%) and conference & banqueting (-15.6%).
As a result of the strong revenue performance and costs savings, hotels in Lisbon recorded a profit conversion of 39.4% of total revenue in July, and the growth this month contributed to the 6.7% year-on-year increase in profit per room for year-to-date 2018 to €48.26.
Profit & Loss Key Performance Indicators – Lisbon (in EUR)
July 2018 v July 2017
RevPAR: +15.1% to €104.90
TrevPAR: +12.1% to €138.72
Payroll: -1.0 pts to 30.5%
GOPPAR: +19.5% to €54.69
UK
A 5.6% year-on-year increase helped hotels in the UK hit a historic TRevPAR high this month, propelled by a robust year-on-year increase in RevPAR and also supported by growth in non-rooms revenues.
At £162.48 per available room, TRevPAR at hotels in the UK in July was 0.8% above the previous high of £161.14 recorded in September 2017 and represented a second consecutive month of TRevPAR growth in what has otherwise been a fairly forgettable year of trading for hotels in the UK.
The growth in total revenue was driven by a 7.9% increase in RevPAR, which hit £114.34 this month, and was also a record, far exceeding the previous high of £107.14 achieved ten months earlier.
Hotels in the UK successfully recorded an increase in both room occupancy (+1.7-percentage points), to 87.1%, as well as a 5.7% increase in achieved average room rate, which soared to a high of £131.21 and was 4.4% ahead of the previous high.
The growth in rooms revenue in July was supported by a year-on-year increase in non-rooms revenues, including food & beverage (+0.4%) on a per available room basis. However, further TRevPAR growth was hampered by a 0.6% decline in conference & banqueting revenue.
In addition to the growth in revenue, hotels in the UK successfully recorded a 0.6-percentage-point saving in payroll, which fell to 24.8% of total revenue.
As a result of the movement in revenue and costs, profit per room at hotels in the UK increased by 7.2% year-on-year to £71.10. Whilst this was not a record, it did equal the profit performance of September 2017.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
July 2018 v July 2017
RevPAR: +7.9% to £114.34
TRevPAR: +5.6% to £162.48
Payroll: -0.6 pts to 24.8%
GOPPAR: +7.2% to £71.10
The robust demand levels were led by the leisure segment, which accounted for 36% of accommodated roomnights this month, well above the annual average of 31.9% for the 12 months to July 2018.
Growth was also supported by increases in the achieved rate in the commercial segment, including the corporate (+3.5%) and residential conference (+11.9%) sectors.
“July is not historically a month during which UK hoteliers would expect to be achieving a TRevPAR high. However, soaring demand levels, which have primarily been led by the leisure segment have helped hotels to drive top line revenues in this month over the last couple of years,” said Pablo Alonso, CEO of HotStats.
“The strength of demand has been attributed to an uplift in staycations since the Brexit vote, as well as an increase in international visitors to the UK. The improvement will be to the delight of hotel owners and operators as July presents an opportunity to drive revenue and profit which previously did not exist.”
The growth in top- and bottom-line performance for hotels in the UK in July was mirrored and exceeded by hotels in London, which recorded a 12.8% year-on-year increase in profit per room, which soared to a high of £115.00.
This was almost 45% above the GOPPAR level recorded at hotels in London for year-to-date 2018 at £79.52 and was well ahead of the previous high recorded in September 2017 at £107.64.
The year-on-year growth in profit per room was led by a 9.9% increase in TRevPAR, which grew to £226.79, as a 12.5% increase in RevPAR was supported by increases in non-rooms revenues, including food & beverage (+1.7%) and leisure (+0.6%) on a per available room basis.
In line with the total UK market, hotels in London recorded a year-on-year decline in revenue in the conference & banqueting department (-5.0%), further illustrating that accommodation demand this month was driven by the leisure segment.
In addition to the uplift in revenue, hotels in London recorded a 1.3-percentage-point saving in payroll, which fell to just 21.3% of total revenue and contributed to profit conversion climbing to a healthy 50.7% of total revenue.
Profit & Loss Key Performance Indicators – London (in GBP)
July 2018 v July 2017
RevPAR: +12.5% to £178.57
TRevPAR: +9.9% to £226.79
Payroll: -1.3 pts to 21.3%
GOPPAR: +12.8% to £115.00
The growth in top- and bottom-line performance for hotels in London was led by volume, with room occupancy soaring by 4.7-percentage points to a lofty 92.1%. In addition, achieved average room rate increased by 6.7% year-on-year to hit a high of £193.90.
“Wimbledon, the Hampton Court Flower Show, the Pride Parade and the British Summertime Festival in Hyde Park, coupled with buoyant domestic and international visitor numbers, helped drive record profit performance for hotels in London in July,” said Alonso.
Hopefully, properties in the capital can maintain this positive performance to offset the GOPPAR decline so far this year.”
Despite the overall increase in visitor numbers to the UK, hotels in leisure-led Stratford-upon-Avon continued to suffer a decline across all performance metrics in July, which was punctuated by a 10.9% decrease in profit per room, which fell to £42.54. This represented a sixth consecutive month of year-on-year profit decline for hotels in the town.
Whilst hotels in Stratford-upon-Avon successfully recorded an increase in volume this month, with room occupancy increasing by 1.8-percentage points, to 81.8%, this was cancelled out by a 2.4% decline in achieved average room rate, which fell to £92.24 and equated to a year-on-year RevPAR dip by -0.3% in July to £75.27.
In addition to the drop in rooms revenue, hotels in the birthplace of Shakespeare suffered a drop in non-rooms revenue, which contributed to the 6.7% decline in TRevPAR to £124.51.
Whilst a further increase in payroll levels to 31.6% of total revenue meant profit conversion at hotels in Stratford-upon-Avon fell to 34.2% of total revenue in July, this remained above the conversion for year-to-date 2018 at 27.5%.
Profit & Loss Key Performance Indicators – Stratford-upon-Avon (in GBP)
July 2018 v July 2017
RevPAR: -0.3% to £75.27
TRevPAR: -6.7% to £124.51
Payroll: +1.3 pts to 31.6%
GOPPAR: -10.9% to £42.54
USA
Top-line growth continues for U.S. hotels, but flow through isn’t keeping up.
Despite a 1.1-percent year-on-year increase in RevPAR, profit per room at hotels in the U.S. dropped 2.2 percent this month due to declining non-rooms revenues and rising costs,.
Profit per room at hotels in the U.S. dropped to $82.23 this month, almost 24 percent below the $101.92 GOPPAR recorded for year-to-date 2018. This was only the second month since the beginning of 2018 that year-on-year profit per room has fallen in what has been a positive period of performance.
While hotels in the U.S. successfully recorded an increase in rooms revenue, a decline was recorded in non-rooms revenues, including food & beverage (down 2.3 percent) and conference & banqueting (down 3.5-percent) on a per-available-room basis.
Despite the decline in ancillary revenues, hotels in the U.S. successfully recorded a 0.4-percent increase in TRevPAR to $236.65, which contributed to the 2.8-percent increase in total revenue for year-to-date 2018 and represented a tenth consecutive month of year-on-year growth in this measure.
However, rising costs, which included a 0.9-percentage-point increase in labor, to 36.5-percent of total revenue, as well as a 0.4-percentage-point uplift in overheads, to 24.4 percent of total revenue, impeded growth in total revenue.
As a result of the movement in revenue and costs, profit conversion at hotels in the U.S. slumped to 34.7 percent of total revenue, which is well below the year-to-date average of 38.5 percent of total revenue.
Profit & Loss Key Performance Indicators – U.S. (in USD)
July 2018 v July 2017
RevPAR: +1.1% to $159.63
TRevPAR: +0.4% to $236.65
Payroll: +0.9 pts to 36.5%
GOPPAR: -2.2% to $82.23
While there are some signs of a summer slump, room occupancy levels remained relatively buoyant, at 80.4 percent, in spite of a 0.9-percentage-point decline. The strength of demand enabled hoteliers to leverage achieved average room rate to record a 2.2-percent year-on-year increase to $198.47, which contributed to its ongoing upward trajectory.
In contrast to recent months, in which average room rate has been driven by the commercial segment, the growth in July was fuelled by the leisure segment, which included an increase in individual leisure (up 9.2 percent), as well as group leisure (up 15.4 percent) segments, but was also supported by a 22.1-percent increase in rate in the corporate segment to $194.52.
“Achieved average room rate has been the mainstay for U.S. hoteliers in recent years, with year-on-year growth recorded in every month since September 2017 suggesting it has been a very positive period of trading,” said Pablo Alonso, CEO of HotStats.
“However, more regularly, the growth in rate has not been sufficient to outpace a drop in room occupancy or falling ancillary revenues as well as rising costs. The performance this month provides further evidence that it is key for hotel owners, operators and investors to look beyond RevPAR to understand the true performance of hotels.”
In line with the performance of hotels across the U.S. this month, properties in Washington, D.C., also had a tough stretch as profit per room plunged by 13.9 percent year-on-year to $66.35, which was 63 percent below the year-to-date GOPPAR figure for the nation’s capital at $108.14.
This year has been an operating challenge for hotels in Washington, D.C.: falling top-line revenues, as well as rising costs, have meant year-on-year profit per room has now fallen by 11.8 percent in the seven months to July 2018.
The challenges to GOPPAR this year are in contrast to the year-on-year increases recorded in both 2016 (10.3-percent) and 2017 (7.9-percent).
While hotels in the city recorded an increase in non-rooms revenues this month, which included an uplift in food & beverage (3.1-percent), conference & banqueting (11.2-percent) and leisure (2.8-percent), revenue on a per-available-room basis was not enough to offset the 8-percent drop in rooms revenue, and as a result, TRevPAR fell by 4.1-percent in July to $245.67.
In addition to falling total revenue levels, hotels in Washington, D.C., continue to suffer increases in costs, illustrated by the 2.2-percentage-point lift in labor this month to 44 percent, which is well above the average recorded in this measure for year-to-date 2018, at 38.7 percent of total revenue.
Profit & Loss Key Performance Indicators – Washington D.C. (in USD)
July 2018 v July 2017
RevPAR: -8.0% to $168.83
TrevPAR: -4.1% to $245.67
Payroll: +2.2 pts to 44.0%
GOPPAR: -13.9% to $66.35
Declining RevPAR levels at hotels in the capital have been hit by a drop in both room occupancy (down 1.3 percentage points) and average room rate (down 6.6 percent) for year-to-date 2018, which is symptomatic of a drop in demand, an increase in supply or both.
“In addition to not having the benefit of major events driving top-line performance as they did in 2017, hoteliers in Washington, D.C., are now starting to feel the impact of the ongoing hotel building boom, which has seen the addition of more than 3,000 bedrooms in recent years,” said Alonso.
In line with the movement in the U.S. overall, hotels in New Orleans suffered a 5.6-percent drop in profit per room in July, in spite of a 0.2-percent increase in RevPAR.
While hotels in New Orleans successfully recorded a 7.7-percent increase in achieved average room rate to $167.14, it was almost entirely wiped out by a 5.3-percentage-point decline in room occupancy.
In addition, declining non-rooms revenues contributed to the 0.7-percent drop in TRevPAR in July to $176.46.
Profit & Loss Key Performance Indicators – New Orleans (in USD)
July 2018 v July 2017
RevPAR: +0.2% to $118.77
TrevPAR: -0.7% to $176.46
Payroll: +0.7 pts to 34.3%
GOPPAR: -5.6% to $56.96
Falling revenue levels were further hit by a 0.7-percentage-point increase in labor costs to 34.3-percent of total revenue.
At $56.96, this was the lowest GOPPAR level recorded at hotels in New Orleans so far in 2018 and equivalent to a profit conversion of just 32.3 percent of total revenue, which is well below the year-to-date average of 45.4 percent.
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.
