Hotstats Hotels Performance: MENA, Europe, UK and US (March 2018)

MIDDLE EAST & AFRICA

Hotels in the Middle East & Africa successfully cut costs to fuel a 4.6% year-on-year increase in profit per room this month, which was in spite of a mixed revenue performance, according to the latest worldwide poll of full-service hotels from HotStats.

Profit per room at hotels in the Middle East & Africa climbed to $96.95 this month, which was primarily thanks to cost savings, which included a 0.3-percentage point reduction in Payroll levels, to 24.2% of total revenue, as well as a 0.5-percentage point drop in Overheads, to 22.9% of total revenue.

Top-line performance at hotels in the Middle East & Africa was positive, recording a 3.3% increase in RevPAR, which was as a result of a 4.3-percentage point uplift in room occupancy, to 74.0%, and was in spite of a 2.6% decline in achieved average room rate, to $175.24.

However, declines in Non-Rooms Revenues, including Food & Beverage (-0.3%) and Conference & Banqueting (-2.4%), meant year-on-year TrevPAR growth fell to just 1.6%, to $223.64.

In addition to falling ancillary revenues, which have challenged TrevPAR levels in Q1 2018, the standout issue at hotels in the Middle East & Africa is plummeting room rates.

For the year-to-date, hotels in the region have recorded significant declines across most sectors, which have included Best Available Rate (-8.5%), Residential Conference (-9.9%), Corporate (-7.9%) and Group Leisure (-6.6%) segments.

As a result, RevPAR for Q1 2018 has fallen by 0.5% to $176.43, against the same period in 2017, which was despite a 3.0-percentage point uplift in room occupancy to 71.2%.

Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)

March 2018 v March 2017

RevPAR: +3.3% to $129.62

TrevPAR: +1.6% to $223.64

Payroll: -0.3 pts to 24.2%

GOPPAR: +4.6% to $96.95

At $96.95 per available room, March was one of the strongest months of GOPPAR performance for hotels in the Middle East & Africa in the last 12 months, behind only April 2017 ($106.06) and November 2017 ($101.21) and should signal a robust couple of months of trading before hotels in the region hit the challenging summer period.

As a result of the movement in revenue and costs, profit conversion at hotels in the Middle East & Africa was recorded at a punchy 43.4% of total revenue, which contributed to the conversion of 41.6% of total revenue for Q1 2018.

The profit conversion for year-to-date 2018 is slightly above that recorded in the same period in 2017, at 41.0%, suggesting that hotels in the Middle East & Africa are becoming more efficient, which will be welcome news for hotel owners and operators in the region.

One of the top performing markets in the Middle East & Africa this month was a resurgent Cairo, which recorded a 16.0% year-on-year increase in profit per room for the month, which contributed to the 10.1% increase in GOPPAR at hotels in the Egyptian capital in Q1 2018.

The contribution this quarter means that hotels in Cairo are gearing up for another successful year of operation following the profit growth in 2016 (+49.5-percent) and 2017 (+68.0-percent).

The increase in profit per room at hotels in Cairo in March was driven by a 14.3% year-on-year increase in RevPAR, which was primarily due to an 8.5-percentage point uplift in room occupancy, to 74.0%, as well as a 1.3% increase in achieved average room rate, to $84.36.

The additional volume generated by hotels in Cairo is driving Non-Rooms Revenues, which included a significant year-on-year increase in Food and Beverage (+28.7%), Conference and Banqueting (+38.1%) and Leisure (+42.9%).

After the political and economic challenges which faced Cairo in recent years, the Egyptian capital has recovered significant ground and at a rapid pace, with TrevPAR levels in the 12 months to March 2018 ($97.64) having more than doubled over the last 24 months, from $48.31 in the 12 months to March 2016.

Profit & Loss Key Performance Indicators – Cairo (in USD)

March 2018 v March 2017

RevPAR: +14.3% to $62.41

TrevPAR: +15.1% to $102.19

Payroll: -1.6 pts to 14.9%

GOPPAR: +16.0% to $56.00

In addition to the positive top line performance, hotels in Cairo recorded a 1.6-percentage point saving in Payroll to 14.9% of total revenue, which contributed to the profit conversion of 54.8% of total revenue in March.

As a result of the movement in revenue and cost, profit per room at hotels in Egypt has increased by almost 190% in the 36 months to March 2018, to $52.64 in the 12 months to March 2018 from $18.20 per available room during the same period in 2014/15.

“Cairo has been through some tough times in recent years, including the Arab Spring, their worst recession since the 1930s, a military coup and numerous terror attacks.

If there is a silver cloud in such devastation, it is that hotels in the Egyptian capital are now amongst the most efficient in the entire region, regularly recording a profit conversion of more than 50% of total revenue. It is pleasing to see them performing so well,” added Pablo.

In line with the growth in the Egyptian capital, hotels in Giza recorded a positive month of profit performance in March, with GOPPAR increasing by 16.4% year-on-year, to $46.14.

The growth in GOPPAR at hotels in Giza was led by a 15.0% year-on-year increase in TrevPAR, to $93.92, which was primarily due to a 10.9% increase in RevPAR, to $62.88.

For hotels in Giza, the increase in Rooms Revenue this month was driven by a 6.0-percentage point increase in room occupancy, to 77.6%, as volume continues to recover across Egypt, as well as a 2.4% increase in achieved average room rate, to $81.04.

Profit & Loss Key Performance Indicators – Giza (in USD)

March 2018 v March 2017

RevPAR: +10.9% to $62.88

TrevPAR: +15.0% to $93.92

Payroll: -1.4 pts to 19.5%

GOPPAR: +16.4% to $46.14

EUROPE

Hotels in Europe recorded a 0.7% year-on-year increase in profit per room in March, which was in spite of heavy declines in Non-Rooms Revenue.

Amongst the falling Non-Rooms Revenues, hotels in Europe suffered year-on-year declines in Food & Beverage (-2.0%) and Conference & Banqueting (-7.1%) revenue, on a per available room basis.

In contrast, a robust 2.7% increase in Rooms Revenues went someway to offsetting the decline in ancillary revenues. The RevPAR growth this month was fuelled by a 3.2% year-on-year increase in achieved average room rate, to €150.12, and was in spite of faltering room occupancy levels which fell by 0.3-percentage points, to 68.5%.

The growth in achieved average room rate this month was supported by increases across all sector rates, including Residential Conference (+3.8%), Corporate (+4.8%) and the Group Leisure (+11.8%) segment. However, there was a notable decline in volume from the Commercial sectors, which cumulatively fell by 3.2-percentage points, to 39.4% of accommodated roomnights.

As a result of the movement in all revenue departments, TrevPAR at hotels in Europe maintained its upward trajectory, but at a much slower rate than the previous two months, at just 1.1% year-on-year, to €159.40. This meant that TrevPAR growth for hotels in Europe was recorded at +3.1% for Q1 2018.

Furthermore, and in contrast to January and February 2018, profit levels were hit by rising costs, which included a 0.6-percentage point increase Payroll, to 35.2% of total revenue.

Profit & Loss Key Performance Indicators – Europe (in EUR)

March 2018 v March 2017

RevPAR: +2.7% to €102.80

TrevPAR: +1.1% to €159.40

Payroll: +0.6 pts to 35.2%

GOPPAR: +0.7% to €50.04

Whilst hotels in Europe recorded an eleventh consecutive month of profit growth, the year-on-year increase this month was more measured, at just 0.7%, to €50.04. This was equivalent to a profit conversion of 31.4% of total revenue.

Despite the much lower year-on-year increase in profit this month, at €37.37 per available room, GOPPAR levels for Q1 2018 were a hearty 6.8% above the same period in 2017.

In line with the decline in Non-Rooms Revenues at hotels across Europe, properties in Rome recorded a significant decrease in Food & Beverage (-16.2%) and Conference & Banqueting (-23.1%) revenue on a per available room basis.

This decline was further exacerbated by a considerable drop in Rooms Revenue at hotels in the Italian capital, which fell by 9.8% year-on-year, to €129.43.

Profit & Loss Key Performance Indicators – Rome (in EUR)

March 2018 v March 2017

RevPAR: -9.8% to €129.43

TrevPAR: -12.1% to €203.92

Payroll: +11.8 pts to 49.2%

GOPPAR: -37.5% to €27.80

Although hotels in Rome recorded a 2.8% year-on-year increase in achieved average room rate in March, to €210.52, it was entirely wiped out by an 8.6-percentage point decrease in room occupancy, to 61.5%, as the city’s hoteliers wrestle with falling volume across all market segments.

The decline this month continued the trend for Q1 2018, which has seen RevPAR at hotels in the Italian capital drop by 2.3% year-on-year due to a 5.8-percentage point decrease in room occupancy, to 54.5%.

As a result of the movement across all revenue departments, TrevPAR at hotels in Rome fell by 12.1% in March, to €203.92.

An 11.8-percentage point year-on-year increase in Payroll, to 49.2% of total revenue, heaped further pressure on to hoteliers in Rome and contributed to the 37.5% decline in GOPPAR in March, to €27.80. This is equivalent to a profit conversion of a lowly 13.6%.

“Whilst hotels in Rome have never been the most profitable in Europe due to high labour costs, this has been a particularly poor start to the year, with profit conversion recorded at just 6% of total revenue in Q1 2018.

And although the first three months of the year are traditionally the quietest for hotels in the Italian capital, all eyes will be on the performance next month, which could set alarm bells ringing for owner and operators if it is another month of decline in volume, particularly in the leisure segment,” said Pablo Alonso, CEO of HotStats.

In line with the decline in profit per room at hotels in Rome, properties in Prague suffered a 0.5% year-on-year decline in March.

Somewhat surprisingly, the drop in profit was on the back of a robust 3.9% increase in RevPAR, up to €67.62, as hotels in the Czech capital recorded a 2.6-percentage point increase in room occupancy, to 73.0%, as well as a 0.3% increase in achieved average room rate, to €92.66.

Top line revenue at hotels in Prague this month was primarily driven by growth in the leisure sector, which included an increase in rate in the Individual Leisure (+11.6%) and Group Leisure (+13.6%) segments.

However, hotels in Prague were also hit by falling Non-Rooms Revenues, which included a drop in Food & Beverage (-2.0%) and Conference & Banqueting (-8.2%) revenue on a per available room basis, which reduced the year-on-year growth in TrevPAR for the month to just +1.0%, to €113.08.

Profit & Loss Key Performance Indicators – Prague (in EUR)

March 2018 v March 2017

RevPAR: +3.9% to €67.62

TrevPAR: +1.0% to €113.08

Payroll: +1.8 pts to 27.7%

GOPPAR: -0.5% to €42.18

And whilst Non-Rooms Revenues fell, operational costs for hotels in Prague increased, illustrated by the 1.8-percentage point increase in Payroll to 27.7% of total revenue, as well as a 0.4% increase in Overheads, which grew to 23.8% of total revenue.

As a result, profit per room at hotels in Prague fell by 0.5% in March, to €42.18, and contributed to the 3.2% drop in GOPPAR for the Czech capital in Q1 2018, which is in spite of a 1.4% increase in RevPAR recorded in the first three months of the year.

UK

Year-on-year profit per room dropped by 5.6% this month as the wettest March in a decade, as well as unseasonal snow storms, added to the already challenging trading conditions for hotels in the UK.

The drop in profit at hotels in the UK was led by a 1.4% decrease in TrevPAR, to £129.69, as declines were recorded across all revenue departments, including Rooms (-1.2%), Food and Beverage (-2.4%) and Conference and Banqueting (-5.5%) on a per available room basis.

In the Rooms department, a 0.6-percentage point decline in room occupancy, to 75.2%, was further exacerbated by a 0.3% drop in achieved average room rate, to £109.91, which contributed to the 1.1% decline in RevPAR, to £82.61.

As a result of the poor weather, it was demand from the leisure segment which was hardest hit, resulting in a 3.9% year-on-year decrease in rate in the Individual Leisure segment this month, as well as a 0.3% decline in rate in the Group Leisure segment.

The revenue decrease was further exacerbated by rising costs, which included a 1.1-percentage point increase in Payroll to 29.2% of total revenue, as well as a 0.9% increase in Overheads, which grew to 23.4% of total revenue.

Once again, the uplift in Overheads was largely due to an increase in Utility costs, which soared by 11.5% year-on-year in March, to almost 4% of total revenue, as the UK was blanketed in snow. At £5.15, on a per available room basis, Utility costs this month were more than 8% above the average in the rolling 12 months to March 2018.

Profit & Loss Key Performance Indicators – Total UK (in GBP)

March 2018 v March 2017

RevPAR: -1.2% to £82.61

TrevPAR: -1.4% to £129.66

Payroll: + 1.1 pts to 29.2%

GOPPAR: -5.6% to £46.13

As a result of the movement in revenue and costs, GOPPAR at hotels in the UK fell by 5.6% year-on-year to £46.13 in March. This was equivalent to a profit conversion of 35.6% of total revenue.

“Spring failed to materialise in March and instead it was replaced with heavy snow fall and bone-chilling temperatures as the UK experienced its worst winter since 1991.

This had the double-whammy effect of causing a drop in top line performance as hazardous conditions meant the advice was not to travel, but also the bottom line was hit by high payroll costs, as it was way too late to adjust staffing levels, and the cold weather meant the heating had to stay on,” said Pablo Alonso, CEO of HotStats.

One city which did have a positive performance in March was Birmingham, where hotels recorded a 12.0% year-on-year increase in GOPPAR, which was due to high demand levels in the city as a result of a number of key events.

In addition to the city hosting the IAAF World Indoor Athletic Championships, which will be the biggest global athletics event of 2018, the NEC played host to a number of major exhibitions, including the Internet Retailing Expo and the British Tourism and Travel Show, which cumulatively attracted more than 8,000 attendees.

As a result of the high demand levels, and in spite of the poor weather conditions, RevPAR at hotels in Birmingham increased by 10.1% year-on-year, to £75.59, which was due to a 0.9-percentage point increase in room occupancy, to 82.4%, as well as an 8.9% increase in achieved average room rate, to £91.71.

The growth in Rooms Revenue was driven by an increase in the rate recorded in the Best Available Rate segment (+10.9%) as well as a surge in rate in the Individual Leisure (+11.1%) and Group Leisure (+9.4%), segments and was supported by an uplift in the Corporate (+8.1%) and Residential Conference (7.9%) sectors rates.

The uplift in Rooms Revenue was supported by increases in Non-Rooms Departments, which included a 1.3% year-on-year increase in Food & Beverage revenue, to £31.88 per available room, equivalent to 28.6% of total revenue. This contributed to the 7.2% year-on-year increase in TrevPAR in March, to £111.59.

Profit & Loss Key Performance Indicators – Birmingham (in GBP)

March 2018 v March 2017

RevPAR: +10.1% to £75.59

TrevPAR: +7.2% to £111.59

Payroll: -0.8 pts to 23.3%

GOPPAR: +12.0% to £50.24

In addition to the growth in revenue, cost savings, which included a 0.6-percentage point drop in Payroll levels, to 23.3% of total revenue, contributed to the 12.0% year-on-year increase in profit per room in March, to £50.24. This was equivalent to a punchy profit conversion of 45.0% of total revenue.

In contrast to the performance of hotels in the UK’s second city, properties in the capital were having more of a torrid time, with profit per room plummeting by 8.8% this month, to £72.22.

In addition to flights being cancelled at all of London’s major airports, events in the city were put on hold and tourists stayed away.

Whilst hotels in the capital just about managed to maintain room occupancy levels at around 80%, achieved average room rate fell by 2.9% year-on-year to £152.58; and as a result, RevPAR at hotels in London dropped by 3.3% to £120.83.

Further declines in Non-Rooms Revenues contributed to the 3.2% decline in TrevPAR this month, to £172.60 and added to the challenges faced by hoteliers in the capital since the beginning of 2018.

“The snowy disruption to trading is the last thing hotels in London would have wanted this month. Particularly as they are already trying to navigate their way through the choppy waters caused by the addition of close to 7,000 bedrooms to supply in 2017 and Q1 2018,” added Pablo.

Profit & Loss Key Performance Indicators – London (in GBP)

March 2018 v March 2017

RevPAR: -3.3% to £120.83

TrevPAR: -3.2% to £172.60

Payroll: +1.6 pts to 26.5%

GOPPAR: -8.8% to £72.28

The decline this month means that hotels in London have suffered a 6.2% drop in GOPPAR in Q1 2018, to £60.50, which could continue the mixed period of trading following the profit drop in 2016 (-2.0%) and growth in 2017 (+5.4%).

USA

Achieved average room rate at hotels in the USA hit a high of more than $220 in March, fuelling the continued increase in profit per room as the market goes from strength to strength.

Whilst the achieved average room rate recorded at hotels in the USA represented a year-on-year increase of just 2.1-percent, at $220.42, it was enough to exceed the previous recent high of $217.06 recorded in October 2017 and continues the purple patch of performance currently being enjoyed by USA hoteliers.

In addition to the growth in rate, a 0.2-percentage point increase in room occupancy, to 81.7-percent, helped RevPAR levels at hotels in the USA also soar to the highest level recorded in recent years, at $180.07, which is almost 14-percent above the RevPAR for the rolling 12-months to March 2018 at $158.28.

In line with the year so far, the rate growth at hotels in the USA in March was spurred by increases in both the Individual Leisure (+1.8-percent) and Group Leisure (+4.2-percent) segments, which was in contrast to a decline in rate in the Corporate (-2.2-percent) segment.

Despite the peak performance in the Rooms department, a decline was recorded in Non-Rooms revenues this month, which included a drop in Food & Beverage Revenue (-1.0-percent), as well as Conference & Banqueting Revenue (-4.0-percent) on a per available room basis.

As a result, TrevPAR at hotels in the USA increased by 1.3-percent, to $285.87. This also represented a post-Global Financial Crisis TrevPAR peak for the USA market.

Profit & Loss Key Performance Indicators – USA (in USD)

March 2018 v March 2017

RevPAR: +2.3% to $180.07

TrevPAR: +1.3% to $285.87

Payroll: +0.6 pts to 32.9%

GOPPAR: +1.5% to $119.49

However, due to escalating costs, which included a 0.6-percentage point increase in Labor costs, to 32.9-percent of Total Revenue, profit per room at hotels in the USA in March (at $119.49) remained behind the previous high recorded in this measure at $121.56 in October 2017.

Nevertheless, the contribution this month means that hotels in the USA successfully recorded a 1.8-percent increase in GOPPAR for Q1 2018, which has continued the positive period of trading following the profit growth in 2016 (+3.6-percent) and 2017 (+3.0-percent).

“March is typically a positive month of performance at hotels in the USA driven by a strengthening in demand from both the leisure and corporate segments following a not particularly exciting January and February. It should also mark the beginning of a buoyant period of trading through to August.

With profit performance already well ahead of the same period in 2017 and the strength of performance in March could mean hotels in the USA are getting set for yet another banner year,” said Pablo Alonso, CEO of HotStats.

In contrast to the positive performance recorded across the USA, hotels in Austin are struggling to maintain profit levels as additions to supply hit revenue and costs continue to creep upwards.

For hotels in Austin, a decline in revenue was recorded across all measures, including Rooms (-3.1-percent), Food &Beverage (-1.4-percent) and Conference & Banqueting (-5.8-percent), which contributed to the 3.5-percent decline in TrevPAR in March, to $308.99.

The key issue facing hotels in Austin is additions to supply, which have recently included a 1,048-bedroom Fairmont, a 1,012-bedroom JW Marriott, an 801-bedroom Hilton, a 492-bedroom Renaissance, a 278-bedroom Aloft/144-bedroom Element, as well as the 160-bedroom Hotel Zaza.

Whilst hotels in Austin managed to maintain room occupancy levels at a stalwart 87.5-percent in March, achieved average room rate for hotels in the city fell by 3.2-percent, to $262.78.

The decline this month contributed to the 2.6-percent drop in achieved average room rate for Q1 2018, to $222.03, as the market becomes increasingly competitive.

Profit & Loss Key Performance Indicators – Austin (in USD)

March 2018 v March 2017

RevPAR: -3.1% to $230.03

TrevPAR: -3.5% to $308.99

Payroll: +1.1 pts to 21.6%

GOPPAR: -7.9% to $167.79

The decline in revenue levels at hotels in Austin was further exacerbated by the uplift in Labor costs, which increased by 1.1-percentage points in March to 21.6-percent of total revenue.

On a positive note, although profit per room at hotels in the Texan capital fell by 7.9-percent year-on-year, to $167.79, profit conversion remained punchy at 54.3-percent of total revenue. Furthermore, the GOPPAR recorded at hotels in Austin in March remained 51.3-percent above the profit per room for the rolling 12 months to March 2018, at $110.92.

“The development boom in Austin has undoubtedly had an impact on the profit performance of hotels in the city and the top of the market in particular is becoming very crowded with significant openings from key upscale brands, such as Fairmont and JW Marriott.

However, the pressure is unlikely to let up anytime soon as three of the largest players in the hotel industry have big plans for development across Texas, with Marriott planning 92 hotel developments, Hilton planning 75 hotels and IHG looking at more than 100 schemes across their range of brands within the three major metro areas,” added Pablo.

Hotels in Seattle fared better this month, recording a 4.6-percent year-on-year increase in TrevPAR, to $228.90, which was on the back of growth in revenue in the Rooms (+4.5-percent), as well as Non-Rooms departments, including Food & Beverage (+3.5-percent) on a per available room basis.

And despite a 0.1-percentage point increase in Labor costs, to 33.3-percent of total revenue, hotels in Seattle recorded a 5.3-percent increase in profit per room for the month, to $91.40.

This continues the strong performance for Seattle hoteliers which has resulted in a steady increase in GOPPAR over the last 24 months to $108.58 in the 12 months to March 2018 from $101.34 during the same period in 2015/16.

Profit & Loss Key Performance Indicators – Seattle (in USD)

March 2018 v March 2017

RevPAR: +4.5% to $165.25

TrevPAR: +4.6% to $228.90

Payroll: +0.1 pts to 33.3%

GOPPAR: +5.3% to $91.40

 

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.

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