Year-on-year profit per room dropped by 5.6% this month as the wettest March in a…
January 26, 2018 9:30 am
December was a lacklustre end to a positive year for hotels in the UK, as a decline was recorded across all key metrics, including profit, according to the latest worldwide poll of full-service hotels from HotStats.
Despite recording a 1.0% increase in achieved average room rate in December, to £116.43, hotels in the UK suffered a 0.8-percentage point decline in room occupancy, to 70.3%, which forced a 0.1% decline in RevPAR, to £81.90.
And although hotels in the UK achieved an increase in Non-Rooms Revenues, including Conference & Banqueting (+0.4%) and Leisure (+1.3%) on a per available room basis, this growth was cancelled out by a 0.1% drop in Food & Beverage revenue, to £49.44 per available room.
As a result, this month, TrevPAR at hotels in the UK fell by 0.1% year-on-year, to £139.43.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
December 2017 v December 2016
RevPAR: -0.1% to £81.90
TrevPAR: -0.1% to £139.43
Payroll: + 0.5 pts to 27.8%
GOPPAR: -0.3% to £53.00
The decline in TrevPAR was further exacerbated by rising costs, led by the 0.5 percentage point increase in Payroll, to 27.8% of total revenue, which were in spite of a 1.8% saving in ‘Overhead’ costs.
As a result, GOPPAR at hotels in the UK dropped by 0.3% to £53.00 in December, which is equivalent to a profit conversion of 38.0% of total revenue.
The limited year-on-year growth in revenues highlighted the marginality of the increases in profit being recorded at hotels in the UK on a departmental basis, with falling revenues and rising costs contributing to a drop in departmental profit in both the Rooms (-0.7%) and Food & Beverage (-3.9%) department, on a per available room basis.
“December is always a tough month of trading with the interruption of the Christmas break and whilst the performance at hotels in the UK this month will be somewhat of an anti-climax, owners and operators in the UK will be pleased that losses have been minimised and it has been a pretty positive year overall,” said Pablo Alonso, CEO of HotStats.
In contrast to the UK-wide trend, hotels in Bristol performed well in December, but leant heavily on third party intermediaries to achieve growth.
Hotels in the South West city recorded an 8.3% increase in RevPAR this month, to £55.73, which was entirely due to a 5.0-percentage point increase in room occupancy, to 64.8%, as achieved average room rate fell by 0.1%, to £85.97.
Profit & Loss Key Performance Indicators – Bristol (in GBP)
December 2017 v December 2016
RevPAR: +8.3% to £55.73
TrevPAR: +3.0% to £105.93
Payroll: -2.9 pts to 26.2%
GOPPAR: +2.9% to £36.49
However, the 23.1% year-on-year increase in Rooms Cost of Sales (ie the HotStats measure of Travel Agent’s Commissions, Reservation Fees, GDS Fees, Third Party Fees and Internet Booking Fees) suggests the proportion of demand sourced from third party sources increased significantly.
For December, Rooms Cost of Sales was recorded at £5.55 on a per available room basis, equivalent to approximately 9.9% of Rooms Revenue, which is a significant proportion.
As a result, and in spite of the strong RevPAR growth, on a conversion basis, the increase in Rooms departmental profit was marginal, at +0.3 percentage points to 66.1% of Rooms Revenue.
Despite the growth in Rooms Revenue, hotels in Bristol suffered declines in Non-Rooms departments, including Food & Beverage (-1.8%) and Conference & Banqueting (-8.5%) on a per available room basis, which contributed to TrevPAR growth shrinking to just 3.0% year-on-year, to £105.93.
However, cost savings, which included a 2.9-percentage point drop in Payroll to 26.2% of total revenue, meant astute Bristol hoteliers were able to record a 2.9% increase in profit per room, to £36.49.
Meanwhile, whilst hotels across a number of regional cities in the UK recorded punchy growth this month, properties in the capital struggled to keep up, recording a 3.3% decline in GOPPAR on the back of a 1.2% drop in TrevPAR.
Profit & Loss Key Performance Indicators – London (in GBP)
December 2017 v December 2016
RevPAR: -1.2% to £128.50
TrevPAR: -1.2% to £188.45
Payroll: +1.2 pts to 25.0%
GOPPAR: -3.3% to £83.83
RevPAR in December was challenged by falling room occupancy levels, which dropped by 1.3-percentage points, to 77.9% and cancelled out the 0.4% increase in achieved average room rate, to £164.94.
In addition to the drop in Rooms Revenue, falling Non-Rooms Revenues contributed to the overall picture of decline in December, as TrevPAR fell to £188.45.
“The London hotel market is heavily reliant on the commercial sector, which fell away, as always, towards the end of December as the Christmas holidays kicked in.
Furthermore, the room occupancy performance in the capital has been tested in 2017 by the addition of almost 5,800 bedrooms. This is an issue which is unlikely to go away anytime soon, with a further 10,000 rooms entering the market in 2018,” added Pablo.
Falling revenue levels in the capital were further exacerbated by increasing costs, which were led by a 1.2-percentage point increase in Payroll, to 25.0% of total revenue. As a result of the movement in revenue and costs, profit per room at hotels in London fell by 3.3% year-on-year in December, to £83.83, equivalent to a profit conversion of 44.5 per cent of total revenue.
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.
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