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June 29, 2018 11:15 am
Following twelve consecutive months of year-on-year profit growth, hotels in Europe recorded a -3.6% drop in GOPPAR in May which was due to falling revenues and rising costs, according to the latest worldwide poll of full-service hotels from HotStats.
The lengthy positive period of performance for hotels in Europe came to an end despite Rooms Revenue remaining flat at €131.46 per available room.
Instead it was a decline in revenue across all Non-Rooms departments, including Food & Beverage (-3.7%), Conference & Banqueting (-8.8%) and Leisure (-5.4%), which led to the 1.1% decline in TrevPAR in May, which fell to €193.66. This was also the first time since April 2017 that hotels in Europe have recorded a decline in TrevPAR, illustrating the strength of performance in the region over the last year.
In addition to the drop in revenue across Non-Rooms departments, hotels in Europe suffered a +1.2-percentage point increase in Payroll, to 31.6% of total revenue, as well as a +0.4 percentage point uplift in Overheads, to 20.1% of total revenue.
As a result of the movement in revenue and costs, profit per room at hotels in Europe fell by -3.6% in May to €75.43, which is equivalent to a profit conversion of 38.9% of total revenue.
Profit & Loss Key Performance Indicators – Europe (in EUR)
May 2018 v May 2017
RevPAR: +0.0% to €131.46
TrevPAR: -1.1% to €193.66
Payroll: +1.2 pts to 31.6%
GOPPAR: -3.6% to €75.43
Despite the negative year-on-year performance for hotels in Europe in May, GOPPAR for the month remained 50.1% higher than the year-to-date average for the region at €50.25.
May was also the first month since October 2016 that hotels in Europe have failed to record a year-on-year increase in RevPAR. And whilst hotels in the region successfully recorded a 2.1% year-on-year increase in achieved average room rate this month, to €174.48, this was entirely wiped out by a 1.6-percentage point decline in room occupancy, to 75.3%.
Although hotels in Europe were able to maintain the upward momentum in achieved average rate in the commercial sector in May, which included an uplift in the Residential Conference (+8.0%) and Corporate (+4.9%) segments, declines were recorded in the leisure segment this month, led by a -3.1% year-on-year drop in rate in the Individual Leisure rate.
“In line with the buoyant economic growth in the Eurozone and against any predictions from the doomsayers about the fallout from Brexit, hotel profit performance in Europe has gone from strength to strength since October 2016, hitting a high in the rolling 12 months to April 2018.
The positive GDP growth forecasts for the region and record-breaking tourism growth in recent years suggest this is more of a blip than a major cause for concern,” said Pablo Alonso, CEO of HotStats.
Amsterdam was one of the key hotel markets in Europe which struggled to turn a profit in May as commercial demand fell away and demand from the leisure segment was underwhelming.
In line with the wider European market, despite hotels in Amsterdam recording a +1.6-percentage point increase in room occupancy, to a punchy 87.4%, as well as a +0.5% increase in achieved average room rate, to €265.93, the +2.3% year-on-year increase in Rooms revenue in May was almost entirely wiped out by falling Non-Rooms revenues.
Primarily as a result of a -6.3% decline in Food & Beverage revenue, as well as a -23.2% drop in revenue from the Conference & Banqueting department, TrevPAR growth for May was muted at just +0.5% year-on-year, to €307.60.
The performance challenges in the Dutch capital in May were further exacerbated by rising costs, which included a 0.4-percentage point increase in Payroll, to 24.8% of total revenue.
The increase in costs meant that profit per room at hotels in Amsterdam remained flat in May, at €148.25. However, this month remained one of the strongest performing of the last 12 months, second only to September 2017, when GOPPAR peaked at €149.38.
Profit & Loss Key Performance Indicators – Amsterdam (in EUR)
May 2018 v May 2017
RevPAR: +2.3% to €232.36
TrevPAR: +0.5% to €307.60
Payroll: +0.4 pts to 24.8%
GOPPAR: +0.0% to €148.25
Despite the flat performance this month and a mixed start to the year, profit per room at hotels in Amsterdam has increased by +1.8% for year-to-date 2018, to €98.40, which is further to the strong profit performance in 2016 (+3.9%) and 2017 (+4.5%).
“Amsterdam has been one of the most reliable hotel markets in Europe for owners, operators and investors in recent years with performance showing no signs of relenting.
Whilst recent protests about the ‘Disneyfication’ of the Dutch capital are less than positive, the reaction from local government, which included a moratorium on new hotel development, greater control over properties in the sharing economy and potential investment to encourage tourists to explore ‘Greater Amsterdam’ will buoy local residents and existing hoteliers,” added Pablo.
Paris was one of the markets to benefit from an uplift in demand from the leisure segment in May, as the city’s hoteliers were able to leverage an increase in rate in both the Individual Leisure (+19.3%) and Group Leisure (+2.6%) segments.
This contributed to the +3.2% overall increase in achieved average room rate for the month, to €372.18, which, in addition to a 2.8-percentage point increase in room occupancy, helped to drive a 7.4% increase in TrevPAR, to €401.21.
Profit & Loss Key Performance Indicators – Paris (in EUR)
May 2018 v May 2017
RevPAR: +7.5% to €265.16
TrevPAR: +7.4% to €401.21
Payroll: +0.4 pts to 47.3%
GOPPAR: +12.0% to €84.89
Despite the 0.4-percentage point increase in Payroll levels, to 47.3% of total revenue, profit per room at hotels in Paris increased by 12.0% year-on-year in May, to €84.89.
And whilst profit levels remain well below those achieved prior to the terrorism attacks in the French capital in November 2015, GOPPAR has grown by almost €17 over the last year, to €86.81 in the 12 months to May 2018, from €70.29 during the same period in 2016/2017.
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.