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February Profit Slide Exposes Flow-Through Deficiency in Europe

Despite slight upticks in RevPAR and TRevPAR, profit per room at hotels in mainland Europe fell in February, unmasking flow-through challenges, according to the latest data tracking full-service hotels from HotStats.

It’s an ongoing concern that stretches back to last year. The 4.1-percent YOY drop in GOPPAR is the third consecutive month the KPI has declined and follows a January YOY decrease of 9.7 percent.

RevPAR ticked slightly upward 0.9 percent, fuelled by a 2.2-percent increase in achieved average room rate to €143.14. YOY occupancy fell by 0.8 percentage points to 62.2 percent.

Falling ancillary revenues in February included declines in food & beverage, which was down 0.8 percent YOY, and was accompanied by a 6.2-percent YOY jump in food cost of sales on a per-available-room basis.

TRevPAR increased a faint 0.1 percent to €138.26 and although this was more than €10 above the TRevPAR recorded in January, it remained almost €40 below the 12 months to February 2019 at €175.37.

Profit & Loss Key Performance Indicators – Mainland Europe (in EUR)
February 2019 v. February 2018
RevPAR: +0.9% to €88.98
TRevPAR: +0.1% to €138.26
Payroll %: +0.5 pts. to 41.8%
GOPPAR: -4.1% to €29.45

The meagre growth in total revenue was wiped out by rising costs, which included a 0.5-percentage-point increase in payroll levels as a percentage of total revenue to 41.8 percent, as well as a 0.5-percentage-point increase in overheads as a percentage of total revenue to 28.6 percent.

As a result, profit contribution was recorded at just 21.3 percent of total revenue. Furthermore, flow through for the month was recorded at -781 percent, illustrating the challenges of rising costs against static revenues in the region.

“Since late 2016, RevPAR and TRevPAR have made healthy month-over-month advances, but are now flattening, and even turning negative in some instances. Hoteliers are having issue growing revenues high enough to contain mounting costs, resulting in slight to negative profit,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “

The impact of rising costs outpacing revenue growth were no better illustrated than in Barcelona, where hotels suffered a 14.7-percent YOY decline in GOPPAR to €97.11; this despite a 2.0-percent increase in RevPAR to €167.01.

Profit & Loss Key Performance Indicators – Barcelona (in EUR)
February 2019 v. February 2018
RevPAR: +2.0% to €167.01
TRevPAR: -5.1% to €259.95
Payroll %: +2.9 pts. to 29.2%
GOPPAR: -14.7% to €97.11

As a result of movement in departmental revenues, TRevPAR fell by 5.1 percent to €259.95.

In addition, rising costs, which included a 5.6-percent increase in total hotel labour costs on a per-available-room basis, were a further pain point for hoteliers.

In contrast, Berlin recorded a 16.6-percent increase in profit per room in February to €62.48, which was 13.5-percent above the GOPPAR recorded in the 12 months to February 2019 at €55.07.

Growth was led by an 8.6-percent increase in RevPAR to €125.70 and an even greater 11.3-percent rise in TRevPAR to €199.81.

Thanks to a 1.0-percentage-point saving in payroll levels as a percentage of total revenue, hotels in Berlin recorded a profit contribution of 31.3 percent of total revenue in the month.

Profit & Loss Key Performance Indicators – Berlin (in EUR)
February 2019 v. February 2018
RevPAR: +8.6% to €125.70
TRevPAR: +11.3% to €199.81
Payroll %: -1.0 pts. to 32.0
GOPPAR: +16.6% to €62.48

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Editor’s Notes:

The hotels profiled in this report are drawn from the HotStats database and reflect the portfolios and distribution of the hotel chains that we survey and which operate in the full-service sector.

Please note: The data samples are reviewed and rebased each year to reflect the changes in the HotStats survey base. As a result, performance ratios published last year may differ from those contained within this report.

Glossary:

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.

GOPPAR - Is the Total Gross Operating Profit for the period divided by the total available rooms during the period.

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