MIDDLE EAST & AFRICA
Hotels in the Middle East & North Africa recorded a 34.8-percent year-on-year decrease in profit per room in September, as revenue levels slid and costs escalated, according to the latest data tracking full-service hotels from HotStats.
September signalled yet another month of year-on-year profit decline for hotels in the region as the growth recorded in August’s positive month of performance was wiped away. At $37.82 for the month, GOPPAR was only just above the annual low of $35.80 recorded in June.
The drop in profit was led by declines across all revenue centres, including Rooms (down 15.4 percent), Food & Beverage (down 10.7 percent), Conference & Banqueting (down 6.3 percent) and Leisure (down 14.6 percent), on a per available room basis. This mix contributed to a 13-percent decrease in TRevPAR for the month to $159.66.
RevPAR declines were a result of a drop in both room occupancy, which fell by 1.9-percentage points to 64.4 percent, coupled with a 12.8-percent decline in achieved average room rate, which fell to $137.74. This was the lowest average room rate recorded in the region in 2018.
The drop in revenue was further exacerbated by rising costs, which included a 4.4-percentage-point increase in payroll, to 34.8 percent of total revenue, as well as a 4.1-percentage-point increase in overheads, which grew to 33.8 percent of total revenue.
Profit & Loss Key Performance Indicators – Middle East & North Africa (in USD)
September 2018 v September 2017
RevPAR: -15.4% to $88.73
TRevPAR: -13.0% to $159.66
Payroll: +4.4 pts. to 34.8%
GOPPAR: -34.8% to $37.82
As a result of the swings in revenue and cost, profit conversion at hotels in the Middle East & North Africa was recorded at 23.7 percent of total revenue in September, well below the margin for year-to-date 2018 at 34.7 percent.
“The month of September is illustrative of the challenges hoteliers in the MENA market have faced in recent years, with profit per room recorded at $37.82 this month, which is half of the GOPPAR recorded in the same period in 2015,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “Whilst the year-on-year decline this month may be, in part, due to the high recorded this time last year, as the Eid al-Adha celebrations crept into September, the longer term trend of decline in profit will be more of a worry for hotel owners and operators in the region.”
In contrast to the decline across all KPIs at hotels in the region, properties in Riyadh successfully recorded an 18.5 percent year-on-year increase in GOPPAR this month to $58.07, which was driven by demand associated with a number of major conferences in the Saudi capital.
The growth in profit at hotels in Riyadh was led by a 10.7-percent increase in rooms revenue per available room to $101.09, which was due to an 11.1-percentage-point increase in room occupancy to 59.6 percent, which offset the 9.9-percent decline in achieved average room rate to $169.71.
The growth in rooms revenue also successfully compensated for the decline across all non-rooms departments, including Food & Beverage (down 3.7 percent) and Conference & Banqueting (down 17.7 percent), on a per available room basis.
As a result of the movement across all revenue centres, TRevPAR at hotels in Riyadh increased by 5.1 percent year-on-year to $162.45. And whilst this was almost $60 above TRevPAR recorded in the Saudi capital in August, it remained 11.8 percent below the year-to-date figure at $184.11.
The growth in TRevPAR at hotels in Riyadh was further buoyed by a year-on-year drop in payroll, which fell by 0.7 percentage points, to 33.5 percent of total revenue.
Primarily due to the growth in room occupancy this month, profit margin at hotels in Riyadh was recorded at a healthy 35.7 percent of total revenue, which is only just behind the conversion of 37.6 percent recorded at hotels in the city in the nine months to September 2018.
However, growth in profit at hotels in Riyadh was against a worrying backdrop of declining room rates, which included a decrease in rate in the corporate (down 12.4 percent), individual leisure (down 52.8 percent) and group leisure (down 42.5 percent) segments.
Profit & Loss Key Performance Indicators – Riyadh (in USD)
September 2018 v September 2017
RevPAR: +10.7% to $101.09
TRevPAR: +5.1% to $162.45
Payroll: -0.7 pts. to 33.5%
GOPPAR: +18.5% to $58.07
In line with the decline in the wider region, the timing of Eid al-Adha this year meant that year-on-year profit plummeted at hotels in Medina in September, following a strong month of GOPPAR growth in August.
In addition to recording a 40-percent year-on-year decline in September to $107.35, RevPAR at hotels in Medina this month was almost $128 below August, when the city benefited from celebrations associated with the holy festival.
In addition to the drop in rooms revenue, hotels in Medina recorded a decline across all other revenue centres in September, which contributed to the 35.7-percent year-on-year decrease in TRevPAR to $183.72.
As a result of the movement in revenue and cost, profit per room at hotels in Medina fell by 54 percent year-on-year to $80.74. Whilst this was 15.3 percent below GOPPAR recorded at hotels in the Saudi city in the nine months to September 2018, it was also $190.90 below the profit per room in August.
“The revenue and profit performance at hotels in Medina did not read well this month; however, owners and operators will not be too dismayed following the outstanding performance last month,” said Grove.
Profit & Loss Key Performance Indicators – Medina (in USD)
September 2018 v September 2017
RevPAR: -40.0% to $107.35
TRevPAR: -35.7% to $183.72
Payroll: +10.8 pts to 29.9%
GOPPAR: -54.0% to $80.74
EUROPE
Though summer has ended, hotel performance in Europe remained hot in September, with key performance indicators showing continued resilience.
Year-over-year profit per room increased by 3.7 percent year-over to €96.80, which was second only to the peak recorded at hotels across the region in June at €105.07, and was almost 44 percent above the figure for year-to-date 2018 at €67.34.
The YOY increase in profit per room was driven by growth across all revenue centres, including Rooms (up 3.3 percent), Food & Beverage (up 0.6 percent) and Conference & Banqueting (up 1.6 percent), on a per-available-room basis, which contributed to the 2.5-percent uplift in TRevPAR to €220.98.
September also marked a return to more robust levels of non-rooms revenue performance, illustrated by the contribution from the Food & Beverage department, which was recorded at €60.46 per available room this month, compared to just €44.05 last month.
The positive performance this month was slightly marred by a 0.1-percentage-point increase in Payroll costs, which grew to 28.2 percent of total revenue.
However, GOPPAR growth continues unabated at hotels in Europe and has now increased by 10.4 percent in the nine months to September 2018, against the same period in 2017, with profit conversion this month recorded at a strong 43.8 percent of total revenue.
Profit & Loss Key Performance Indicators – Europe (in EUR)
September 2018 v September 2017
RevPAR: +3.3% to €152.31
TrevPAR: +2.5% to €220.98
Payroll: +0.1 pts. to 28.2%
GOPPAR: +3.7% to €96.80
“Profit performance at hotels in Europe typically peaks in the months of June and September, which is when there is an overlap in the major commercial and leisure demand segments, which supercharge performance for hotels across the region,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “Hoteliers in Europe will now be keen to maintain profit performance into Q4 2018 and record yet another year of bumper GOPPAR growth.”
Top-line growth for hotels in Europe in September was led by a 4.2-percent increase in achieved average room rate, which grew to €185.43 and offset the 0.7-percentage-point decline in room occupancy to 82.1 percent.
One of the top performing markets in Europe this month was Athens, where profit per room increased by 8.2 percent year-on-year to €136.46.
The uplift in GOPPAR was led by growth in the Rooms department, which increased by 6.1 percent YOY to €203.79 and was fuelled by a 10.6-percent increase in achieved average room rate to €229.33. This offset the 3.7-percentage-point decline in room occupancy to 88.9 percent, although this was a high for 2018.
Top-line growth this month was primarily driven by the commercial segment, as the Greek capital continues to recover its position in the European business market, and included YOY increases in achieved rate in both the corporate (up 6.2 percent) and residential conference (up 4.2 percent) segments.
As a result of growth across all departments, TRevPAR at hotels in the city increased by 5.3 percent in September to €295.21.
The growth in revenue was supported by cost savings, which included a 0.6-percentage-point reduction in payroll to 36.6 percent. As a result of the punchy top-line performance and reduction in costs, profit conversion at hotels in Athens was recorded at 46.2 percent of total revenue.
Profit & Loss Key Performance Indicators – Athens (in EUR)
September 2018 v September 2017
RevPAR: +6.1% to €203.79
TrevPAR: +5.3% to €295.21
Payroll: -0.6 pts. to 26.6%
GOPPAR: +8.2% to €136.46
“Hoteliers in Athens have undoubtedly been through a rough time over the last decade due to the challenges in the Greek economy and only exited their most recent recessionary period in mid-2017,” said Grove. “However, the rate recorded in the corporate segment has increased by more than €30 over the last 18 months, suggesting that the market is back on an upward trend.”
In line with the performance of hotels in Athens, properties in Berlin also performed well in September, recording an 18.4-percent increase in profit per room to hit €107.89.
This was the highest GOPPAR recorded at hotels in the German capital in 2018 and was 106 percent above the year-to-date figure at €52.44.
The growth in profit was fuelled by a 14-percent increase in RevPAR, which also hit a high for the year at €171.01. This was primarily due to a 10.8-percent increase in achieved average room rate to €195.37, as well as a 2.5-percentage-point increase in room occupancy to 87.5 percent.
Falling costs, which included a 1.2-percentage-point decrease in payroll to 24.3 percent of total revenue, added to the positive story for the city’s hotels this month, and resulted in profit conversion of 44.8 percent of total revenue.
Profit & Loss Key Performance Indicators – Berlin (in EUR)
September 2018 v September 2017
RevPAR: +14.0% to €171.01
TrevPAR: +10.7% to €241.09
Payroll: -1.2 pts. to 24.3%
GOPPAR: +18.4% to €107.89
UK
Profit per room at hotels in the UK fell by 4 percent in September, as a summer marked by GOPPAR growth came to a halt and demand levels shifted toward a more business-led mix.
The drop in profit was primarily due to a 1.3-percent decline in rooms revenue, which fell to £105.77. This was in contrast to an increase in non-rooms revenue, which included an uplift in food & beverage (up 0.8 percent) and conference & banqueting (up 1.7 percent) revenue, on a per-available-room basis.
As a result of the movement across all revenue centres, TRevPAR at hotels in the UK fell by 0.9 percent in the month to £159.66. This represents the first decline in this measure since before the strong period of summer trading began back in May 2018.
The fall in revenue was further exacerbated by rising costs, which included a 1.0-percentage-point increase in payroll to 25.7 percent of total revenue, as well as a 0.6-percentage-point increase in overheads, which grew to 19.9 percent of total revenue.
On a departmental basis, rising costs contributed to falling profit levels in both the Rooms (down 2.3 percent) and Food & Beverage (down 0.9 percent) departments, on a per-available-room basis.
Overall, despite the year-on-year decline in GOPPAR, profit conversion at hotels in the UK in September remained relatively strong at 42.8 percent of total revenue.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
September 2018 v September 2017
RevPAR: -1.3% to £105.77
TrevPAR: -0.9% to £159.66
Payroll: +1.0 pts. to 25.7%
GOPPAR: -4.0% to £68.26
In addition to the 0.2-percentage-point decline in room occupancy in September to 85.0 percent, hotels in the UK recorded a 1.1-percent drop in achieved average room rate, which fell to £124.44.
The drop in volume and price this month was led by the commercial segment, which suffered a 2-percent decrease in the achieved rate in the corporate sector to £119.62.
“Whilst hoteliers across numerous markets in the UK would have been glad to see the back of the quieter summer period, unfortunately, the return to business as usual has been blighted by a return to the challenging trading conditions of early 2018,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA at HotStats. “This is unsurprising due to the relatively stagnant UK economy, with GDP growing by just 0.5 percent in Q3 2018, and the UK being slow to come back to work following such a celebrated summer period.”
In contrast to the performance of the total UK, hotels in Liverpool recorded a robust month of profit growth in September as the city welcomed the 2018 Labour Party Conference.
The burgeoning demand levels enabled hoteliers in the River Mersey city to leverage achieved average room rate, which increased by 11.8 percent in the month to £88.64, the second-highest rate recorded in the city in 2018. The growth in rate fuelled an 11.4-percent increase in RevPAR in September to £75.39.
Despite the growth in rooms revenue, hotels in Liverpool missed the opportunity to drive non–rooms revenue this month, which fell across all departments, including food & beverage (down 5.9 percent) and conference & banqueting (down 11.5 percent).
Despite the decline in non-rooms revenue, hotels in the city drove a 6-percent increase in TRevPAR to £102.84.
The growth in revenue, as well as cost savings, which included a 0.6-percentage-point drop in payroll to 23.7 percent of total revenue, contributed to the 10.2-percent increase in GOPPAR for the month, which was recorded at £42.19.
Profit & Loss Key Performance Indicators – Liverpool (in GBP)
September 2018 v September 2017
RevPAR: +11.4% to £75.39
TrevPAR: +6.0% to £102.84
Payroll: -0.6 pts. to 23.7%
GOPPAR: +10.2% to £42.19
“The political party conferences are typically a huge benefit to hoteliers in the host city, and this month was no exception for properties in Liverpool,” Grove said. “However, the lack of revenue derived from non-rooms sources will be a disappointment to owners and operators and will be considered a missed opportunity.”
Further south, hotels in Cambridge suffered only their second month of GOPPAR decline in 2018, marring what has been a very positive period of performance so far this year.
Whilst profit per room at hotels in the university city dropped by 12.3 percent year-on-year in September to £65.53, it remained well above the year-to-date figure of £58.45.
The drop in profit was primarily led by a 3.8-percent slide in RevPAR, which was a result of a 1.0-percentage-point drop in room occupancy to 83.8 percent, as well as a 2.7-percent decline in achieved average room rate, which dropped to £123.21.
The year-on-year decline in top-line performance was primarily due to the absence of key events, which fuelled demand during the same period in 2017.
Profit & Loss Key Performance Indicators – Cambridge (in GBP)
September 2018 v September 2017
RevPAR: -3.8% to £103.24
TrevPAR: -4.8% to £145.32
Payroll: -0.1 pts. to 17.4%
GOPPAR: -12.3% to £65.53
In addition to the drop in rooms revenue, declines were recorded across all non-rooms departments and, as a result, TRevPAR for hotels in Cambridge fell by 4.8 percent year-on-year to £145.32.
And whilst hotels in Cambridge recorded a 0.1-percentage-point uplift in payroll, this cost remained relatively low at just 17.4 percent of total revenue, enabling profit conversion to be recorded at a strong 45.1 percent of total revenue.
USA
A bump in corporate travel at the end of the third quarter proved enough to boost GOPPAR and serve as a harbinger of continued strength in the hotel industry as it moves into the fourth quarter.
Profit per room at hotels in the U.S. in September was more than $20 above the GOPPAR recorded in August, according to the latest data tracking full-service hotels from HotStats.
On a year-over-year basis, hotels recorded a 5.9-percent increase in profit per room, driven by growth in revenue across all departments, particularly Food & Beverage, up 7.6 percent, on a per-available-room basis.
As a result of the contribution from non-rooms revenue, TRevPAR at hotels in the U.S. was recorded at $252.30 this month, which was 3.4 percent above the same period in 2017.
“While the summer was a relatively successful period of operation, owners and operators will be glad to see a return to more robust levels of performance and a busy fall period to support the profit growth recorded so far in 2018,” said David Eisen, Director of Hotel Intelligence & Customer Solutions at HotStats.
Growth in TRevPAR was further buoyed by an increasingly rare drop in labor costs, which were recorded at 35.1 percent of total revenue this month, 0.3 percentage points below the same period in 2017.
As a result of the movement in revenue and costs in September, the profit margin at hotels in the U.S. was recorded at a healthy 37.9 percent of total revenue.
Profit & Loss Key Performance Indicators – U.S. (in USD)
September 2018 v September 2017
RevPAR: +0.6% to $158.72
TRevPAR: +3.4% to $252.30
Payroll: -0.3 pts to 35.1%
GOPPAR: +5.9% to $95.66
In San Francisco, profit per room increased by 17.2 percent year-on-year in September as demand levels were driven by major technology conferences.
In addition to the Dreamforce conference, which is one of the largest software conferences in the world, the city’s Moscone Center also hosted the Disrupt SF event in September, driving the demand for hotel accommodation.
As a result of the increased activity, profit per room at hotels in the city jumped by more than $22 YOY in September to $150.13, which was the second-highest GOPPAR level recorded at hotels in the city in 2018.
The growth in profit was led by YOY increases across all revenue departments including Rooms, up 9.6 percent, and Food & Beverage, up 1.6 percent, on a per available room basis, which contributed to the 7.1-percent increase in TRevPAR at hotels in San Francisco this month to $365.57.
Profit & Loss Key Performance Indicators – San Francisco (in USD)
September 2018 v September 2017
RevPAR: +9.6% to $278.13
TrevPAR: +7.1% to $365.57
Payroll: -2.2 pts to 37.4%
GOPPAR: +17.2% to $150.13
The growth in revenue at hotels in San Francisco was further stimulated by cost savings, which included a 2.2-percentage-point reduction in labor costs to 37.4 percent of total revenue.
As a result of the movement in revenue and costs, profit margin at hotels in San Francisco was recorded at 41.1 percent of total revenue in September.
“San Francisco, and the wider Bay Area, is renowned as a hub for technology companies and this is now translating into new events and conferences, supporting the continued growth in the sector and encouraging visitors related to the sector,” said Eisen. “This can only be a good thing for the health of the San Francisco hotel industry, which has shown signs of recovery in profit in 2018 following a challenging period of operation last year.”
Meanwhile, hotels in Phoenix had an even more stellar month, recording a 32.6 percent year-on-year increase in GOPPAR on the back of a 15.6-percent uplift in RevPAR, as top-line growth was driven by an increase in both volume and price.
September marked a return to stronger levels of performance for hotels in the city after the single-figure GOPPAR recorded in July ($5.96) and August ($4.38), as demand from the business segment returned and sparked an increase in profit per room, which hit $67.22.
The growth in profit per room this month was driven by increases in both room occupancy, which grew by 5.2-percentage points to 66.1 percent, as well as a 6.5-percent increase in achieved average room rate to $176.72.
And while the growth in achieved average room rate in the month was driven by an increase across all segments, it was primarily focused in the corporate (up 5.6 percent) and association/convention corporate group (up 8.5 percent) sectors.
“Hotels in Phoenix will be glad to see the end of the summer period as the desert city is not as much a popular leisure destination due to the stifling heat. This was reflected in the profit margin of hotels in the city,” said Eisen. “September has marked a return to business as usual and despite the challenges during the summer, year-to-date profit per room at hotels in Phoenix remains ahead of the same period in 2017.”
In addition to the 15.6-percent increase in rooms revenue, growth was recorded across all non-rooms departments, which contributed to the 9.8-percent increase in TRevPAR, which grew to $232.14.
Profit & Loss Key Performance Indicators – Phoenix (in USD)
September 2018 v September 2017
RevPAR: +15.6% to $116.82
TrevPAR: +9.8% to $232.14
Payroll: -2.6 pts to 38.7%
GOPPAR: +32.6% to $67.22
The growth in top-line performance was further bolstered by a drop in costs, which included a 2.6-percentage point saving in labor, which still remained comparatively high at 38.7 percent of total revenue. This is well above the year-to-date average of 34.7 percent.
Despite the return to a more robust period of operations, profit conversion at hotels in Phoenix remained relatively low at 29 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.
