September 27, 2017 9:28 am

August 2017: GOPPAR Levels Hit a 2017 Low at Hotels in the USA Due to Summer Slump

Despite recording a 0.6-percent increase in RevPAR, GOPPAR at hotels in the USA fell to a year-to-date low of $71.01 in August as demand levels slowed during the summer, according to the latest worldwide poll of full-service hotels from HotStats.

Hotels in the USA successfully recorded a 0.6-percent year-on-year increase in RevPAR this month due to growth in both room occupancy (+0.4-percentage points) and achieved average room rate (+0.1-percent).

However, whilst room occupancy in August was broadly in line with the year-to-date average, at 77.8-percent, achieved room rate this month ($187.00) was 7.8-percent below the average for the eight months to August 2017, $202.83, suggesting significant discounting was deployed to boost demand at USA hotels this month.

As in July, the weakened commercial segment as a result of the summer break provided key challenges for hoteliers this month, illustrated by the achieved corporate rate, which at $186.43 was 9.9-percent below the year-to-date average of $206.89. Furthermore, the residential conference segment rate for August ($201.07) was 18.5-percent below the year-to-date average ($246.85).

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

August 2017 v August 2016

RevPAR: +0.6% to $145.56

TrevPAR: +0.4% to $217.27

Payroll: + 2.5 pts to 37.7%

GOPPAR: -2.5% to $71.01

In contrast to the growth in RevPAR, hotels in the USA suffered declines in Non-Rooms Revenues, including Food and Beverage (-2.5-percent) and Conference and Banqueting (-5.6-percent). As a result, year-on-year growth in TrevPAR was tempered at just 0.4-percent, to $217.27.

However, rising costs, which included a 2.5-percentage point increase in Labor to a punchy 37.7-percent of total revenue, cancelled out the growth in TrevPAR, and contributed to the 2.5-percent drop in profit per room for August to $71.01.

“History would suggest that hotels in the USA are familiar with the slump in demand during August, the associated shift in the market mix and subsequent impact on top line revenues.  

However, the nationwide increases in minimum wage and cost creep in other departments have contributed to profit per room at hotels in the USA falling to its lowest level this year, which is not such a familiar, or very welcome, scenario,” said Pablo Alonso, CEO of HotStats.

The impact of the summer slowdown was less pronounced in New York City due to the broad base of demand, which enabled hotels to record a 0.4% year-on-year increase in RevPAR, to $254.74, which was in spite of a 0.9-percent decline in achieved average room rate, to $286.26.

Profit & Loss Key Performance Indicators – New York City (in USD)

August 2017 v August 2016

RevPAR: +0.4% to $254.74

TrevPAR: + 1.9% to $322.40

Payroll: +3.9 pts to 52.3%

GOPPAR: -0.5% to $76.23

However, the Big Apple continues to face its own challenges, with rising costs once again cancelling out the 1.9-percent increase in TrevPAR. As a result, profit per room at hotels in New York City fell by 0.5-percent this month, to $76.23.

The biggest challenge for hoteliers in New York remains in Payroll, which this month was recorded at 52.3-percent of total revenue, primarily due to the high proportion of unionised Labor in the city.

On a departmental basis, Payroll levels in the Rooms Department increased by 1.5-percentage points in August. In the Food and Beverage Department, Labor costs increased by 6.6-percentage points.

For hoteliers in Seattle, it was a much brighter picture this month, with August representing one of the most lucrative periods of the year.

In addition to room occupancy levels hitting a heady 91.2%, high demand levels fuelled a 2.0-percent increase in achieved an average room rate to $277.61. For hotels in Seattle this represented the peak in rate performance for year-to-date and was 20-percent above the achieved rate in the eight months to August 2017, at $221.91.

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

August 2017 v August 2016

RevPAR: +2.1% to $253.07

TrevPAR: +2.2% to $303.75

Payroll: +1.7 pts to 23.9%

GOPPAR: -0.7% to $163.37

“Seattle is emerging as one of the top visitor destinations in the USA and has been on an upward trajectory in recent years, hitting a record 38.9 million tourists in 2016.

The elevated profile of the city as a tourist destination, as well as the better weather, means that hotel performance peaks during the summer months. Demand levels are also boosted by the city being a major port for cruise ships journeying to and from Alaska, as well as hosting major events, such as those associated with the annual Seafair celebrations,” added Pablo. 

Despite the top line increase, hotels in Seattle suffered a 0.7-percent year-on-year decline in GOPPAR, to $163.37 this month, which was largely due to the 1.7-percentage point increase in Payroll to 23.9-percent of total revenue.

That said, hotels in Seattle remain highly profitable, recording a profit conversion of 53.8-percent of total revenue in August, which is more than double the conversion at hotels in New York City at 23.7-percent of 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.

GOP PAR – Is the Total Gross Operating Profit for the period divided by the total available rooms during the period.

MOST POPULAR
UK Chain Hotels

October 2017: GOPPAR Growth Continues But Profit Conversion Falls at UK Hotels

Hotels in the UK maintained their upward trajectory in GOPPAR growth this month, but the…

37
3 weeks ago
European

October 2017: CEE Leads the Way as GOPPAR Growth Continues for Hotels in Europe

Hotels in Central and Eastern Europe led the way in another bumper month of GOPPAR…

26
2 weeks ago