Waning revenues and rising costs have conspired to hobble profit per room at hotels in…
February 26, 2018 3:30 pm
Profit per room at hotels in the USA dropped by 0.5-percent in January, which was in spite of an increase in revenues across all departments, including RevPAR, according to the latest worldwide poll of full-service hotels from HotStats.
It was a relatively muted start to 2018 for hotels in the USA which recorded a 0.6-percent increase in RevPAR to $138.17, from $137.33 during the same period in 2017.
The growth in RevPAR was due to an increase in both room occupancy (+0.2-percentage points) to 67.9-percent, as well as a 0.3-percent increase in achieved average room rate, to $203.42.
In addition to the growth in Rooms revenue, increases across Non-Rooms departments in January, including Food and Beverage Revenue (+2.9-percent), enabled hotels in the USA to record TrevPAR growth at 1.8-percent for the month, to $229.59.
The growth in headline performance levels at hotels in the USA in January was primarily led by year-on-year increases in the Conference segment. This was illustrated by the (+3.0-percent) increase in revenue in the Conference and Banqueting department, as well as the 2.5-percent increase in achieved rate in the Residential Conference segment to $238.34, which was compared to declines in rate in the Corporate (-2.2-percent) and Leisure (-1.0-percent) segments this month.
Profit & Loss Key Performance Indicators – USA (in USD)
January 2018 v January 2017
RevPAR: +0.6% to $138.17
TrevPAR: +1.8% to $229.59
Payroll: +0.3 pts to 39.3%
GOPPAR: -0.5% to $73.03
However, the growth in top line performance at hotels in the USA in January was cancelled out by a 0.3-percentage point increase in Labour costs to 39.3-percent of total revenue as well as an uplift in Overhead costs.
As a result, GOPPAR at hotels in the USA fell by 0.5-percent this month to $73.03, which was equivalent to a profit conversion of 31.8-percent of total revenue.
In contrast to hotels across the USA, one year on from the peak top and bottom line performance recorded at hotels in Washington DC in January 2017, which were driven by the attendance at the inauguration of President Trump, revenue and profit levels fell back down this month.
Although room occupancy remained relatively robust, for January, at 59.0-percent, achieved average room rate in the city plummeted by 37.1-percent, to $189.23; and despite being well behind the achieved rate in January 2017 ($301.01), it remained above the rate recorded during the same period in 2016, at $181.08.
Profit & Loss Key Performance Indicators – Washington DC (in USD)
January 2018 v January 2017
RevPAR: -39.7% to $111.62
TrevPAR: -31.6% to $171.21
Payroll: +18.5 pts to 61.0%
GOPPAR: -87.2% to $10.11
In addition to the drop in Rooms Revenue, falling Non-Rooms Revenues contributed to the 31.6-percent year-on-year decline in TrevPAR at hotels in Washington DC in January, to $171.21.
Albeit expected following the unique events of this time last year, Labor costs at hotels in the capital sky rocketed this month, by +18.5-percentage points, to 61.0-percent of total revenue, further exacerbating the decline in revenue.
“This month was always going to look bad for hotels in Washington DC, after the benefit of the inauguration this time last year. And performance was certainly not helped by Congress being shut down for several days, as well as an extended cold snap which meant the city suffered some of the lowest temperatures on record,” added Pablo.
As a result of the movement in revenue and costs, profit per room at hotels in Washington DC fell by 87.2-percent year-on-year, to just $10.11, equivalent to a profit conversion of just 5.9-percent of total revenue.
Whilst Miami also felt the cold snap for a few days, the more temperate climate meant that room occupancy levels for January remained strong, at 83.9-percent.
In addition, RevPAR levels were amongst the highest recorded in the last 12 months following an 8.5-percent year-on-year increase to $185.34, which was driven by an 8.9-percent increase in achieved average room rate to $220.94.
The bumper month of Rooms Revenue performance for hotels in Miami was supported by year-on-year increases in Non-Rooms Revenues, including Food and Beverage (+13.5-percent) and Conference and Banqueting (+29.5-percent), which contributed to the 9.9-percent increase in TrevPAR this month, to $267.67.
Furthermore, Miami was one of very few hotel markets to buck the trend of escalating Labour costs in January, recording a 1.9-percentage point drop in this measure, to 27.8-percent of total revenue.
As a result, at $120.98, GOPPAR at hotels in Miami was 16.5-percent ahead of the same period in 2016 and 60-percent above the rolling 12-month average, at $75.57, once again illustrating the strength of demand in South Florida during this time of year.
Profit & Loss Key Performance Indicators – Miami (in USD)
January 2018 v January 2017
RevPAR: +8.5% to $185.34
TrevPAR: +9.9% to $267.67
Payroll: -1.9 pts to 27.8%
GOPPAR: +16.5% to $120.98
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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