Waning revenues and rising costs have conspired to hobble profit per room at hotels in…
July 27, 2018 9:30 am
Hotels in the UK recorded a 3.0% increase in profit per room in June, which was the first monthly year-on-year growth in this measure since the beginning of 2018 and was thanks to an uplift in revenue which outpaced the ongoing increase in costs, according to the latest worldwide poll of full-service hotels from HotStats.
This month was not only the first time that hotels in the UK recorded an increase in GOPPAR, but at £67.82, profit per room in June hit a peak for the year and was well above the year-to-date average in this measure, at £46.83.
The growth in profit this month was fuelled by an increase across all revenue departments, including Rooms (+3.2%), Food & Beverage (+3.2%), Conference & Banqueting (+5.2%) and Leisure (+4.3%) on a per available room basis.
As a result of the movement in revenues, TrevPAR at hotels in the UK increased by 3.1% year-on-year to £158.90. This also represented a high for the year and was 20% above the year-to-date average of £132.23.
Despite the strong revenue performance this month, costs continue to escalate, illustrated by the 0.2-percentage point increase in Payroll for the month, to 25.8% of total revenue.
Profit & Loss Key Performance Indicators – Total UK (in GBP)
June 2018 v June 2017
RevPAR: +3.2% to £105.59
TrevPAR: +3.1% to £158.90
Payroll: +0.2 pts to 25.8%
GOPPAR: +3.0% to £67.82
The growth in Rooms Revenue at hotels in the UK was driven by an increase in room occupancy (+1.5-percentage points), to 84.2%, as well as a 1.4% increase in achieved average room rate, to £125.44.
Whilst the achieved rate in the Leisure sector faltered this month, illustrated by the year-on-year decline in rate in the Individual Leisure (-0.4%) and Group Leisure (-3.2%) segments, growth was driven by the commercial segments, with an increase in the Corporate (+2.2%) and Residential Conference (+2.0%) segments.
The growth in volume and price contributed to a 3.2% year-on-year increase in RevPAR for the month, to £105.59, which was also a peak for 2018 and almost 25% above the year-to-date figure of £85.49.
“June is typically a strong month for hotels in the UK due to a peak in a range of demand segments. The growth this month provides some respite from the profit decline suffered since the beginning of 2018, which will be welcome for owners and operators,” said Pablo Alonso, CEO of HotStats.
Cardiff was one of the top performing markets in June, with GOPPAR increasing by 5.4% year-on-year, to £52.75. This represented a peak in monthly profit performance for Cardiff hotels in recent years.
The profit growth was in spite of a mixed revenue performance as, although hotels in the Welsh capital recorded a 10.0% year-on-year increase in RevPAR, declines were recorded across all other revenue departments, including Food & Beverage (-13.9%) and Conference & Banqueting (-27.9%).
As a result of the movement in revenue, year-on-year TrevPAR growth at hotels in Cardiff was recorded at just +2.8%, to £132.64. Nevertheless, this represented a monthly peak in performance on recent years, ahead of the most recent high recorded in June 2017 at £129.06.
Whilst hotels in Cardiff recorded a -0.2-percentage point decline in room occupancy this month, which remained punchy at 89.4%, this was more than offset by the 10.2% year-on-year increase in achieved average room rate, to £103.96.
Rate growth at hotels in the Welsh capital this month was driven by increases in the Leisure segments, which included a 24.6% increase in the Individual Leisure segment, to £119.41, which was by far the strongest rate recorded in the city in June.
“Top line performance at hotels in Cardiff was driven by a range of events, including a high-profile stop by the Volvo Ocean Race. The race is hosted every three years, takes place over nine months and covers 27,000 nautical miles, which only stops in 12 key global cities and this is the first time the race has visited the UK in more than a decade.
With the race staying in the city for more than two weeks, the benefit to the local economy was significant, as illustrated by the year-on-year growth in performance at local hotels,” added Pablo.
Profit & Loss Key Performance Indicators – Cardiff (in GBP)
June 2018 v June 2017
RevPAR: +10.0% to £92.99
TrevPAR: +2.8% to £132.64
Payroll: -1.3 pts to 25.1%
GOPPAR: +5.4% to £52.75
In addition to the growth in revenue, hotels in Cardiff successfully recorded a -1.3-percentage point saving in Payroll, which fell to 25.1% of total revenue.
As a result of the strong revenue performance and costs savings, hotels in Cardiff recorded a profit conversion of 39.8% of total revenue, and the growth this month contributed to the 2.2% year-on-year increase in profit per room for year-to-date 2018, to £32.34.
Whilst hotels in the Scottish capital did not fare so well in June, growth in profit per room was recorded at +1.2% this month, to £89.34.
This was only the second time in 2018 that hotels in Edinburgh have recorded a year-on-year increase in profit per room and the challenges faced by hotels in the city this year are reflected in the decline in profit per room for year-to-date 2018, which has fallen by -5.0%, to £45.57.
The +1.9% year-on-year increase in TrevPAR at hotels in Edinburgh this month was primarily due to a +2.6% increase in Rooms Revenue, as Food & Beverage revenue fell by -1.9%.
Profit & Loss Key Performance Indicators – Edinburgh (in GBP)
June 2018 v June 2017
RevPAR: +2.6% to £142.08
TrevPAR: +1.9% to £186.34
Payroll: +0.4 pts to 22.0%
GOPPAR: +1.2% to £89.34
Whilst profit conversion remained punchy at 47.9% of total revenue this month, suggesting that hoteliers are effectively managing costs, top line revenues at hotels in Edinburgh are being challenged by additions to stock, which comprised 645 bedrooms in 2017 and H1 2018.
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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