MIDDLE EAST & AFRICA
Waning revenues and rising costs have conspired to hobble profit per room at hotels in the Middle East & North Africa, as GOPPAR in the region has slid by almost 40 percent over the last 36 months, according to the latest data tracking full-service hotels from HotStats.
Bucking the month-to-month downward trend, however, GOPPAR in October, at $77.16, was 104 percent higher than the previous month, but still an 8.1-percent year-over-year decline. Hotels in the region have now recorded a YOY decline in profit in seven of the last 10 months.
The decline this month was led by a 3.8-percent drop in RevPAR, the byproduct of a 5.2-percent decline in average room rate. Further declines were recorded across non-rooms departments, including food & beverage, down 3.7 percent on a per-available-room basis. TRevPAR for the month declined 4 percent to $205.09.
Profit & Loss Key Performance Indicators – Middle East & North Africa (in USD)
October 2018 v. October 2017
RevPAR: -3.8% to $120.25
TRevPAR: -4.0% to $205.09
Payroll: +0.9 pts. to 26.7%
GOPPAR: -8.1% to $77.16
The drop in revenue was further exacerbated by rising costs, which included a 0.9-percentage-point increase in payroll to 26.7 percent of total revenue, as well as a 0.9-percentage-point increase in overheads, which grew to 26.3 percent of total revenue.
As a result of the movement in revenue and costs, profit conversion at hotels was recorded at 37.6 percent of total revenue in October.
“As the market returned to a more commercial-led mix, hotels in the Middle East & North Africa would have expected some positive news following a pretty torrid period of trading during the summer; however, this did not transpire,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats.
In contrast to the wider Middle East & North Africa market, hotels in Egypt performed well, led by Cairo, where hotels recorded a 24.1-percent YOY increase in profit per room to $54.95 for the month. This represented the seventh month of the year in which hotels in the city recorded a YOY increase in GOPPAR.
In addition to a 22-percent increase in rooms revenue, the significant uplift in volume helped hotels in Cairo record strong growth in non-rooms departments, including food & beverage (up 25.2 percent) and conference & banqueting (up 23.2 percent), on a per-available-room basis.
As a result of the movement across all revenue centres, TRevPAR increased by 21.1 percent YOY to $106.36. This was further buoyed by a YOY drop in payroll, which fell by 1.5 percentage points to 15.8 percent of total revenue.
Profit conversion at hotels in Cairo soared to a lofty 51.7 percent of total revenue.
“Egypt is currently bucking the negative trend faced by hoteliers across much of the rest of the Middle East & North Africa, which is being led by robust economic growth forecast at 5 percent for 2018, with greater increases anticipated in 2019 and 2020,” said Grove. “After challenges in 2011, reform momentum is being sustained and the positive economic news will be welcomed by owners and operators.”
Profit & Loss Key Performance Indicators – Cairo (in USD)
October 2018 v. October 2017
RevPAR: +22.0% to $64.71
TRevPAR: +21.1% to $106.36
Payroll: -1.5 pts. to 15.8%
GOPPAR: +24.2% to $54.95
EUROPE
European hoteliers had cause for celebration in October, as hotels recorded a 6.1-percent year-on-year increase in profit per room. Performance was boosted by a number of major festivals hosted in key cities.
Whilst GOPPAR levels actually dipped against September—dropping to €79.57 for the month, against €96.80 last month—the considerable year-on-year growth in October was sufficient to continue to drive a strong year-to-date increase in profit per room, which is now 9.8 percent above the same period in 2017.
Growth in profit this month was aided by a 6.1-percent increase in RevPAR, fuelled significantly by a 5.2-percent increase in achieved average room rate to €171.79.
In addition to year-on-year growth in rooms revenue, hotels in Europe recorded a revenue increase across non-rooms departments, including Food & Beverage (up 0.6 percent) on a per-available-room basis, which contributed to the 3.6 percent uplift in TRevPAR this month to €197.42.
Top-line performance was led by demand from the commercial sector, which accounted for almost 40 percent of all accommodated roomnights.
And whilst there was a decline in the achieved rate in the individual leisure segment in the month (down 2.4 percent), this was cushioned by year-on-year growth in rate in the residential conference (up 6.8 percent), corporate (up 0.6 percent) and group leisure (up 10.8 percent) segments.
Profit & Loss Key Performance Indicators – Europe (in EUR)
October 2018 v. October 2017
RevPAR: +6.1% to €133.27
TRevPAR: +3.6% to €197.42
Payroll: -0.6 pts. to 29.7%
GOPPAR: +6.1% to €79.57
The growth in revenue this month was complemented by cost savings, which included a 0.6-percentage-point reduction in payroll to 29.7 percent of total revenue—despite a 0.1-percentage-point increase in overheads to 20.2 percent of total revenue.
As a result of the movement in revenue and costs, profit conversion at hotels in Europe was recorded at 40.3 percent of total revenue in October.
“Profit performance for hotels in Europe is proving to be very consistent, with just two months of year-on-year GOPPAR decline recorded since October 2016,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “This is despite slowing economic growth across the Eurozone.”
Strong performance across the region was led by contribution from a number of key city markets that hosted major festivals and conferences.
The greatest margin of year-on-year performance growth was recorded in Munich, which hosts the renowned Oktoberfest. The 16-18 day festival annually attracts more than six million people, significantly driving up demand for hotel accommodations in the city. This year was no different, with hotels in Munich recording a 52.4-percent year-on-year increase in profit per room for the month to €132.38, which is a high for 2018, and was 85.9 percent above the year-to-date GOPPAR of €71.22.
The growth in profit was led by an increase across all departments, which included a 33.5-percent increase in RevPAR to €188.30, as room occupancy grew by 5.2 percentage points to 82.2 percent, and achieved average room rate soared by 25.0 percent to €229.11.
Profit & Loss Key Performance Indicators – Munich (in EUR)
October 2018 v. October 2017
RevPAR: +33.5% to €188.30
TRevPAR: +29.4% to €248.99
Payroll: -6.1 pts. to 21.1%
GOPPAR: +52.4% to €132.38
The significant increase in revenue enabled huge cost savings to be made, which included a 6.1-percentage-point reduction in payroll to 21.1 percent of total revenue.
Beyond Octoberfest, the city was supported by a range of major international conferences hosted at the ICM–Internationales Congress Center München, including the 2018 ESMO oncology conference, which attracted more than 24,000 attendees.
As a result of the robust top-line performance and reduction in costs, profit conversion at hotels in Munich was recorded at 53.2 percent of total revenue.
Outside Munich, hotels in Budapest also performed well in October, due in large part to the Hungarian capital hosting the city-wide CAFe Budapest Contemporary Arts Festival, which helped drive a 15.6-percent increase in RevPAR to €123.26.
The growth in rooms revenue in the city was supported by increases in non-rooms revenues, including Food & Beverage (up 14.5 percent) and Conference & Banqueting (up 12.7 percent), which contributed to the 12.2-percent year-on-year increase in TRevPAR to €171.31.
Falling costs, which included a 0.5-percentage-point decrease in payroll, to 22.1 percent of total revenue, added to the positive story for hotels in Budapest and equated into profit conversion of 47.7 percent of total revenue.
Profit & Loss Key Performance Indicators – Budapest (in EUR)
October 2018 v. October 2017
RevPAR: +15.6% to €123.26
TrevPAR: +12.2% to €171.31
Payroll: -0.5 pts. to 22.1%
GOPPAR: +17.1% to €81.75
UK
October was a banner month for hotels in the UK, as strong growth was recorded across all revenue-generating departments and driven by a range of demand sources. This mix helped push hotels to a 9-percent year-on-year increase in profit per room for the month.
Growth in revenue was led by an 8.3-percent year-on-year increase in RevPAR to £102.67, which was fuelled by a 2.3-percentage-point increase in room occupancy to 83.5 percent and a 5.3-percent increase in average room rate to £122.92.
In addition to the growth in rooms revenue, hotels in the UK successfully recorded year-on-year increases in non-rooms revenues, including Food & Beverage (up 4.3 percent) and Conference & Banqueting (up 5.7 percent), on a per-available-room basis.
The growth across all departments contributed to the 6.6-percent year-on-year increase in TRevPAR for the month to £156.36. Whilst this was behind the 2018 peak of £162.59, recorded in July, it remained 10.4-percent above the year-to-date figure at £141.58.
“The robust top-line performance in October was led by demand from the commercial sector, which accounted for almost 40 percent of all accommodated roomnights,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “Demand levels were also supported by the ongoing political party conference season and leisure demand from school half-term holidays. And despite Storm Callum bringing severe flooding to parts of the UK, it was a relatively settled picture, which even included a royal wedding.”
Profit & Loss Key Performance Indicators – Total UK (in GBP)
October 2018 v. October 2017
RevPAR: +8.3% to £102.67
TRevPAR: +6.6% to £156.36
Payroll: -0.8 pts. to 25.9%
GOPPAR: +9.0% to £64.44
Cost savings also abetted the jump in GOPPAR. This included a 0.8-percentage-point drop in payroll, to 25.9 percent of total revenue, and a 0.2-percentage-point saving in overheads, to 20.6 percent of total revenue.
October’s strong growth helped push profit performance for the year back into positive territory, with year-to-date GOPPAR growth of 1 percent to £54.05.
The positive performance could have been even stronger had it not been for some challenges, including in Undistributed Operating Expenses, with year-on-year increases recorded in Administrative & General (up 3.3 percent) and Sales and Marketing (up 3.4 percent), on a per-available-room basis.
While the broader UK performed well, hotels in Newcastle continue to struggle, hurt by escalating costs. These included a 1.0-percentage-point increase in payroll, to 30.7 percent of total revenue, and a 1.4-percentage-point increase in overheads, to 26.7 percent of total revenue.
RevPAR in the city only grew 0.5 percent and was led by a 2.2-percentage-point year-on-year increase in occupancy to 77.1 percent. Conversely, average room rate dropped by 2.3 percent to £74.56.
Furthermore, the slim 0.1-percent increase in TRevPAR, to £91.41, was only due to growth in rooms revenue, which was sufficient to offset the decline recorded across non-rooms departments, including a 1.6-percent decline in food & beverage revenue, to £29.74 per available room.
Profit & Loss Key Performance Indicators – Newcastle (in GBP)
October 2018 v. October 2017
RevPAR: +0.5% to £57.49
TrevPAR: +0.1% to £91.41
Payroll: +1.0 pts. to 30.7%
GOPPAR: -10.4% to £25.40
As a result of the movement in revenue and costs, profit per room at hotels in Newcastle dropped by 10.4 percent in October to £25.40, which is equivalent to a profit conversion of just 27.8 percent.
A closer look at the data suggest that the issue for Newcastle hotels is more long term, illustrated by the ongoing decline in profit per room, which has fallen to £24.37 in the 12 months to October 2018 and is almost £5 lower than the £29.03 GOPPAR recorded during the same period in 2014-15.
“In short, hotels in Newcastle are suffering due to an untimely softening in demand, which has been further exacerbated by increasing costs,” said Grove. “This might well be a warning sign for hotel owners and operators in other provincial markets that it is becoming harder to convert revenue into profits.”
At the other end of the spectrum, Birmingham hotels were amongst the best performing in October as they welcomed a number of conferences, including the 2018 Conservative Party Conference, which attracted more than 11,000 delegates.
As a result, hotels in “Britain’s second city” were able to record an 8.5-percent year-on-year increase in profit per room, which grew to a 2018 high of £55.37, more than 46 percent above the year-to-date figure of £37.91.
Growth was primarily due to a 4.2-percent increase in RevPAR, which was fuelled by a 5.6-percent increase in average room rate to £97.52, a number that was only slightly below the annual high recorded in Birmingham, in September, of £97.64.
In addition to the increase in rooms revenue, growth was recorded across all non-rooms departments and, as a result, TRevPAR for hotels in Birmingham increased by 7.4 percent year-on-year to £119.02.
Profit & Loss Key Performance Indicators – Birmingham (in GBP)
October 2018 v. October 2017
RevPAR: +4.2% to £78.54
TRevPAR: +7.4% to £119.02
Payroll: -0.7 pts. to 22.1%
GOPPAR: +8.5% to £55.37
USA
Profit per room at hotels in the U.S. recorded its highest level of the year in October, as revenue increases were attained across all departments, even in the face of mounting costs.
The 3.6-percent year-on-year increase in October enabled hotels to push profit levels to a high of $126.34 per available room, which was well above the previous high of $120.54 recorded in April 2018. Furthermore, it was approximately $25 above the year-to-date figure, at $101.36, illustrating the strength of bottom-line performance this month.
The growth in profit was driven by an increase across all revenue centers, including Rooms (up 3.2 percent), Food & Beverage (up 2.2 percent) and Conference & Banqueting (up 2.5 percent), on a per-available-room basis.
Helping drive revenue was an annual high achieved in average room rate, which hit $223.36 for the month. It was also a high for the post global financial crisis era.
As a result of the contribution across all revenue departments, TRevPAR at hotels in the U.S. was recorded at $294.57 this month. This was 3.4 percent above the same period in 2017 and a lofty 12 percent above the TRevPAR recorded for year-to-date 2018 at $262.87.
Profit & Loss Key Performance Indicators – U.S. (in USD)
October 2018 v. October 2017
RevPAR: +3.2% to $182.65
TRevPAR: +3.4% to $294.57
Payroll: +0.1 pts. to 31.5%
GOPPAR: +3.6% to $126.34
The solid top-line performance in the month was slightly marred by a year-on-year increase in costs, which included a 0.1-percentage-point uplift in labor costs to 31.5 percent of total revenue, as well as a 0.3-percentage-point increase in overheads, which grew to 20.9 percent of total revenue.
In spite of the cost creep, the robust increase in revenue resulted in a profit margin of 42.8 percent of total revenue.
Top-line performance in October was led by demand from the commercial sector, which accounted for 45.5 percent of all accommodated roomnights.
Furthermore, the growth in achieved average room rate was supported by increases across all demand segments, including Corporate (up 2.6 percent), Residential Conference (up 2.1 percent), Individual Leisure (up 2.6 percent) and Group Leisure (up 4.4 percent).
“It was an extremely positive month of performance for hotels in the U.S., with continued growth leading to new highs across top- and bottom-line metrics,” said David Eisen, Director of Hotel Intelligence & Customer Solutions at HotStats. “Still, hotel owners and operators must keep a vigilant eye on expenses, as they show no signs of attenuating.”
City specific, Austin had a banner month, aided by the F1 Grand Prix Circuit of the Americas, which drew some 250,000 spectators over the weekend of Oct. 19-21 to the area.
The uplift in demand at hotels in the city meant that room occupancy levels soared to an annual high of 87.8 percent, which was 2.2 percentage points above the same period in 2017 and almost 7 percentage points above the year-to-date figure. In addition, achieved average room rate at hotels in the Texan capital increased by 1.8 percent to $244.24.
As a result, hotels in Austin recorded a 4.3-percent year-on-year increase in rooms revenue to $214.45, which contributed to the 3.4-percent increase in TRevPAR to $299.10.
Alongside the acclaimed South by Southwest Festival, the F1 Grand Prix is highly anticipated by hotels in Austin as it brings a significant boost in performance levels, illustrated this month by TRevPAR recorded at more than $55 above the year-to-date figure of $243.08.
Profit & Loss Key Performance Indicators – Austin (in USD)
October 2018 v. October 2017
RevPAR: +4.3% to $214.45
TRevPAR: +3.4% to $299.10
Payroll: +0.2 pts. to 22.1%
GOPPAR: +3.5% to $164.03
Despite the 0.2-percentage point increase in labor costs to 22.1 percent of total revenue, hotels in Austin successfully recorded a 3.5-percent increase in profit per room in October to $164.03
Profit performance was only surpassed by the performance in March, when hotels recorded GOPPAR of $167.79, which was led by demand from South by Southwest.
As Austin hotels were helped out by a sporting event, so, too, was the city of Boston, where October baseball is frequent with the post-season success of the Red Sox. The city achieved a robust year-on-year increase in profit in October, as the Red Sox hosted two World Series games and a number of playoff match-ups.
As a result of the burgeoning demand levels, hotels in the city were able to record a 5.5-percent year-on-year increase in GOPPAR to $225.23, a peak for 2018.
The growth in profit at hotels in the city was led by year-on-year increases across all revenue departments, including Rooms (up 5.0 percent) and Food & Beverage (up 4.7 percent), on a per-available-room basis. This contributed to a 5.1-percent increase in TRevPAR to a heady $429.56.
Despite the year-on-year increase in October, profit per room at hotels in the city for year-to-date 2018 is still 1.6 percent behind the same period in 2017, illustrating the challenging operating conditions in the city this year.
Profit & Loss Key Performance Indicators – Boston (in USD)
October 2018 v. October 2017
RevPAR: +5.0% to $315.16
TRevPAR: +5.1% to $429.56
Payroll: -0.2 pts. to 26.0%
GOPPAR: +5.5% to $225.23
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.
