The vertiginous drop in global hotel revenue and profit performance depicted in March data, continued its free fall in April, marked by dramatic year-over-year decreases across the operating spectrum.
NB: This is an article from Hotstats
The growing chasm in YOY comparison suggests that month-to-month performance measurement may be more reliable in tracking a rebound during the COVID-19 era, signs of which are slowly emerging out of China and suggestive that other global pockets are a month out from an eventual upswing.
As world cases of COVID-19 continue to mount, the travel industry is bearing a large brunt of the pain, especially when looking back on April, a month where many hotels remained shuttered to guests who, regardless, weren’t vigorously booking rooms.
Much of the world’s regions and cities remained in shutdown mode, which negatively impacted performance numbers. Gross operating profit per available room (GOPPAR) expectedly saw triple-digit YOY percentage drops across regions: U.S. (down 122.8%), Europe (down 131.9%), Asia-Pacific (down 124.1%), Middle East (down 115.3%).
The numbers were a trend that started in China in February, after the late-January Wuhan shutdown, and were carried forward like a contagion across the globe, showing no let-up.
U.S. Mood
Although many now, including President Donald Trump, are coaxing states to reopen, April was a lockdown month. Occupancy was anticipatedly abysmal and combined with an almost 50% YOY drop in average room rate, led to a 95.2% YOY decrease in RevPAR. The steep drop in rooms revenue, combined with basically zero F&B gain, resulted in total revenue (TRevPAR) dropping 95% YOY.
April was an especially brutal month for New York, the epicenter of the COVID-19 pandemic in the U.S. Deaths from the disease spiked in the month; the good news is that new cases ebbed toward the back half of the month, a trajectory that continued through May. New York City hotels saw GOPPAR collapse to $-50.60, a 145.7% drop over the same time last year.
According to the American Hotel & Lodging Association, some 70% of hotel rooms were empty across the U.S. as of May 20; this in addition to the thousands of hotels closed completely. For the hotels that remain open, operators have significantly scaled down operations by closing guest room floors and meeting spaces and suspending F&B outlet operations. While many variable costs have been removed, some fixed costs remain that are not impacted by fluctuation in occupancy or sales. As a result of scaled-back operations, total overhead costs were down 66.6% YOY, while total labor costs came down 73.5% YOY. All undistributed expenses were down double-digit percentages YOY.
Cost savings, however, did not cushion profit. For the second consecutive month, GOPPAR turned negative to $-26.34, a 122.8% YOY decrease and 107% greater than March.
Profit & Loss Performance Indicators – Total U.S. (in USD)
| KPI | April 2020 v. April 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -95.2% to $8.81 | -42.8% to $97.43 |
| TRevPAR | -95.0% to $14.40 | -41.3% to $159.32 |
| Payroll PAR | -73.5% to $25.54 | -22.7% to $74.28 |
| GOPPAR | -122.8% to $-26.34 | -67.7% to $32.62 |
European Scene
Like the U.S., Europe was deep in the red in April. In fact, the numbers were strikingly similar. In a propitious sign, new cases of COVID-19 are reportedly falling across Europe’s capitals as the European Union readies to reopen to tourists. (Europe’s tourism industry accounts for approximately 10% of all EU economic output.) But that’s happening later this summer and had little bearing on April data, when countries remained on lockdown.
A sub-10% occupancy and 43% YOY drop in rate led to a 95.4% YOY decrease in RevPAR. TRevPAR was off 93.2% YOY amid a dearth of ancillary revenue combined with the absence of room sales.
Despite total overhead costs coming down 59% YOY for the month, coupled with a 70.2% decrease in labor costs, the appreciable amount of lost revenue led to a 131.9% YOY decrease in GOPPAR to €-17.80, a second consecutive month of negative GOPPAR and 113% increase over March.
Profit & Loss Performance Indicators – Total Europe (in EUR)
| KPI | April 2020 v. April 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -95.4% to €5.31 | -41.8% to €58.39 |
| TRevPAR | -93.2% to €11.51 | -39.3% to €92.65 |
| Payroll PAR | -70.2% to €16.35 | -22.4% to €41.67 |
| GOPPAR | -131.9% to €17.80 | -74.1% to €11.26 |
Looking East to APAC
While overall Asia-Pacific numbers remained depressed in April, in China, some shoots of hope emerged.
APAC as a whole had a relatively strong occupancy story compared to other regions, reaching 20% for the month. Still, RevPAR was down 83.8% YOY, as average room rate was down 39% YOY.
TRevPAR also suffered, down 83.3% YOY amid heavy YOY losses in food and beverage, along with enervated ancillary revenue. A look to F&B revenue reveals an understandable downward slide, hitting $7.85 per available room in April, down 86% from January.
Asia-Pacific’s expense story was similar to other global regions. Total overhead costs were down 51.3% YOY, while labor costs came down 49.5%. Utility expenses were down 54% YOY, a result of large-scale energy not having to be consumed.
GOPPAR for the month was down 124.1% to $-13.92, almost $3 more negative than in March.
Though Asia-Pacific as a whole displayed numbers indicative of the time, China, while still in a soporific state, is trending upward. For the second consecutive month, occupancy rose, up 10 percentage points over March (though still down 44.5 percentage points YOY).
Across the board, key performance indicators saw incremental improvement, including TRevPAR, which showed a 73% improvement on March to $30.29.
GOPPAR, meanwhile, is slowly inching its way back to positivity. After a January that saw GOPPAR at $20.70, it turned negative in the ensuing months, starting with $-28.31 in February. However, each subsequent month has improved, with April GOPPAR clocking in at $-2.57—down 106.2% YOY, but a 90% increase from February’s GOPPAR total and 75% better than March’s total.
Profit & Loss Performance Indicators – Total APAC (in USD)
| KPI | April 2020 v. April 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -83.8% to $16.17 | -57.1% to $41.31 |
| TRevPAR | -83.3% to $27.35 | -55.1% to $73.97 |
| Payroll PAR | -49.5% to $23.99 | -27.6% to $34.50 |
| GOPPAR | -124.1% to $-13.92 | -91.3% to $5.01 |
Middle East Malaise
The Middle East had no such luck escaping profit pain in April. While occupancy hit close to 20% for the month, average rate was still down 32.8%, resulting in RevPAR decreasing 83% YOY. TRevPAR was down 85.4% YOY, while GOPPAR was down 115.3% YOY.
Ramadan (April 23-May 23) did little to improve hotel performance, as even partial easing during the holy month led to a spike in infections.
Meanwhile, a more dire picture is emanating from Dubai, where a recent survey by the Dubai Chamber of Commerce revealed that 70% of businesses in the emirate expected to close within the next six months. Dubai is one of the most diversified economies in the Gulf and hyper reliant on travel and tourism dollars. Within the survey, some 74% of travel and tourism companies said they expected to close in the next month alone.
In April, Dubai saw its GOPPAR drop to $-31.29, a 122% decrease over the same time a year ago.
Profit & Loss Performance Indicators – Total Middle East (in USD)
| KPI | April 2020 v. April 2019 | YTD 2020 v. YTD 2019 |
| RevPAR | -83.0% to $22.97 | -39.7% to $77.44 |
| TRevPAR | -85.4% to $34.28 | -40.1% to $133.23 |
| Payroll PAR | -52.3% to $28.57 | -22.7% to $45.84 |
| GOPPAR | -115.3% to $-14.62 | -57.9% to $36.83 |
Outlook
At this point, some four months into the pandemic, the deleterious and widespread impact of COVID-19 is now readily apparent. As such, it’s virtually obviated the need for yearly performance measurement. Improvement will be measured in baby steps, presenting a clear-cut case for month-to-month comparison, as the global hotel industry looks to build itself back up, one hotel opening at a time.
It’s not alone in the endeavor. While drive-to markets are expected to underpin leisure demand for the near-term, air lift recovery will be key to the global hotel industry’s convalescence. The question of—“If you open it, will they come?”—hangs in the balance.
