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March 29, 2018 10:55 am
Despite recording an increase in revenue across a number of departments, year-on-year profit per room at hotels in the UK fell by 5.1% in February as cost increases continue to accelerate, according to the latest worldwide poll of full-service hotels from HotStats.
Hotels in the UK successfully recorded a 0.2% year-on-year increase in TrevPAR this month, to £122.64, which was due to increases across all revenue departments, including Rooms (+0.4%), Food and Beverage (+0.2%) and Conference and Banqueting (+3.6%).
The growth in Rooms Revenue at hotels in the UK in February was driven by a 1.3% increase in achieved average room rate, to £106.70, and was in spite of a 0.6-percentage point decline in room occupancy, to 73.0%, as volume struggles to grow beyond the current record levels.
Whilst the growth in top line revenue was subdued, it was entirely wiped out by escalating costs, which included a 1.0-percentage point increase in Payroll to 32.5% of total revenue.
Additional cost increases were also recorded in Overheads, which grew by 0.9-percentage points year-on-year, to 26.3% of total revenue, which was largely due to a 7.1% increase in Utility costs, up to £5.55 on a per available room basis.
As a result of the movement in revenue and costs, GOPPAR at hotels in the UK fell by 4.8% year-on-year to £36.65 in February. This was equivalent to a profit conversion of 29.9% of total revenue.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
February 2018 v February 2017
RevPAR: +0.4% to £77.85
TrevPAR: +0.3% to £122.64
Payroll: + 1.0 pts to 32.5%
GOPPAR: -4.8% to £36.65
Payroll increases are putting pressure on profitability throughout the hotel P&L. This is no better illustrated than in the Rooms Department, which suffered a 0.5-percentage point decline in Rooms profit conversion, to 69.9% of Rooms Revenue. This was primarily as a result of a 0.5-percentage point uplift in Rooms Payroll, to 15.5%, as well as a 0.1-percentage point increase in Rooms Expenses, to 6.6% of Rooms Revenue.
“It’s been a tough start to 2018 for hotels in the UK. After several years of consistent growth, the upward trajectory has stalled somewhat, which seems to be as a result of occupancy levels hitting a ceiling.
Now may be the perfect time for hoteliers to consider an alternative strategy, which focuses on searching for opportunities to increase Non-Rooms Revenues, as well as preserving profit levels by reducing costs. This is, of course, easier said than done,” said Pablo Alonso, CEO of HotStats.
In line with the total UK, hotels in the Heathrow Airport market suffered a decline in profit per room. This was not only due to rising costs, but top line performance was hit by the changeable weather conditions in February, which meant flights were cancelled on more than one occasion during the month.
As a result, TrevPAR at hotels at Heathrow fell by 5.3% year-on-year, to £79.77, which was due to plummeting Rooms (-4.6%), Food and Beverage (-9.4%) and Conference and Banqueting (-5.2%) revenue, on a per available room basis.
The drop in Rooms revenue levels at hotels at Heathrow Airport was led by a 3.2-percentage point decline in room occupancy, to 73.0%, coupled with a 0.4% decline in achieved average room rate, to £74.78.
“Heathrow airport is prone to flight cancellations during poor weather conditions, such as snow, ice or fog, and this can sometimes lead to a spike in local hotel performance if passengers are stranded in the area.
However, the prolonged period of snowfall in February, which included a battering by the ‘Beast from the East’ meant people just did not travel unless it was essential, leading to a drop in demand and consequent decline in profit levels,” added Pablo.
Hotels at Heathrow also recorded a 2.5-percentage point increase in Overheads, to 28.8% of total revenue, with Utility expenses soaring by 23.1% year-on-year, to £4.64 per available room.
As a result of the movement in revenue and costs, GOPPAR at hotels at Heathrow Airport fell by 8.9%, to £23.29, which contributed to the 12.9% drop in this measure so far in 2018 and marked a poor start to the year for hotels in the area.
Profit & Loss Key Performance Indicators – Heathrow Airport (in GBP)
February 2018 v February 2017
RevPAR: -4.6% to £54.58
TrevPAR: -5.3% to £79.77
Payroll: +0.9 pts to 32.3%
GOPPAR: -8.9% to £23.29
Hotels around Manchester Airport were no better off, with delays and flight cancellations leading to a drop in both top and bottom line performance levels in February.
Whilst hotels at Manchester Airport were able to record a 2.6% increase in achieved average room rate this month, to £85.21, this was more than cancelled out by the 4.8-percentage point decline in room occupancy, albeit to a still very punchy 84.8%. As a result, RevPAR fell by 2.9%, to £72.26.
In addition to the drop in RevPAR, Non-Rooms Revenues at hotels at Manchester Airport fell, and contributed to the 1.9% decline in TrevPAR, to £111.74.
The falling revenue levels at Manchester Airport hotels were further exacerbated by increasing costs, which included a 1.4-percentage point increase in Payroll to 27.8% of total revenue.
The escalating costs, on top of declining revenues meant profit per room for hotels at Manchester Airport fell by 1.8% to £38.37 in February, equivalent to 34.3% of total revenue.
Despite the challenges this month, demand levels at Manchester Airport are strong, led by an 8.5% year-on-year increase in passenger numbers in 2017, to 27.8 million. As a result, more than 1,000 bedrooms are mooted for development in the local market in the next few years, led by a £100 million Hampton by Hilton/Hilton Garden Inn scheme, which could add 629-bedrooms in to the local market.
Profit & Loss Key Performance Indicators – Manchester Airport (in GBP)
February 2018 v February 2017
RevPAR: -2.9% to £72.26
TrevPAR: -1.9% to £111.74
Payroll: +1.4 pts to 27.8%
GOPPAR: -1.8% to £38.37
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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