Strong December fuels Madrid profit, profit plummets in Paris and profit drop Ccompounded by rising costs in Vienna.

A 19.6% increase in profit per room in December helped hotels in Madrid achieve a 3.8% increase in GOPPAR for 2016, according to the latest data from HotStats.

The growth in GOPPAR (Gross Operating Profit per Available Room) in December was in contrast to a 0.9% decline in RevPAR (Revenue per Available Room) for the month, which was suffered as a result of a 6.8% drop in achieved average room rate, to €126.68.

Despite a strong first half of the year, during which a 6.9% profit per room increase was fuelled by RevPAR growth of 2.7%, hotels in the Spanish capital have struggled to maintain performance in Q2 2016 and have suffered several months of major profit decline, including a 13.6% year-on-year drop in October.

However, cost savings in December have contributed to cost savings for year-end 2016, including Labour (-2.3%) and Overheads (-4.5%) on a per available room basis and as a result, hotels in Madrid recorded a third consecutive year of profit increase in 2016, further to the growth in 2014 (+19.7%) and 2015 (+27.4%), with pre-recession profit decline now a distant memory.

Profit Plummets in Paris

Hotels in Paris suffered a 40.2% year-on-year decline in profit per room in 2016 as top and bottom line performance was hit by a range of natural and man-made incidents.

Parisian hoteliers had a poor start to 2016. As the French capital was reeling from the terrorist attacks in November 2015, year-on-year RevPAR fell by 15.0% in January alone, which led to a 51.1% decline in profit per room for the month and was a sign of things to come.

In addition to a decline in tourism numbers due to the persistent security threat in the city, a number of major incidents hit profit per room at Paris hotels hard, including flooding in June (-40.3%) and rail and air-traffic controller strikes in May (-37.1%) and September (-19.2%). Even hosting the UEFA Euro Championships in June and July provided little respite from the decline.

For year-end 2016, hotels in Paris recorded a 19.9% drop in RevPAR, which is as a result of an 11.3 percentage point drop in occupancy and a 5.9% fall in achieved average room rate, to €314.27.

French employment law has meant that cost cutting has remained challenging for hotels in Paris, illustrated by the 5.1 percentage point increase in Payroll levels to 46.5% of total revenue for the year. As a result of the movement in revenue and costs over the last 12 months, profit conversion at Paris hotels has fallen to just 19.2% of total revenue in 2016, one of the lowest levels in Europe.

Profit Drop Compounded By Rising Costs in Vienna

As well as a 1.4% drop in total revenue, rising labour and overhead costs contributed to a 7.6% decline in profit per room at hotels in Vienna in 2016.

In addition to a 1.5% drop in RevPAR, which was in spite of a 0.3 percentage point increase in room occupancy, hotels in Vienna suffered declines in ancillary revenues, including Food and Beverage (-0.5%) and Conference and Banqueting (-7.4%), which contributed to the 1.4% decline in TrevPAR (Total Revenue per Available Room), to €172.48 in 2016.

Furthermore, recent increases in costs, which have included a 5.3% increase in Overheads and an 8.2% increase in Payroll in the 24 months to December 2016, have eroded profit levels.

The profit decline at Vienna hotels in 2016 was all the more disappointing as it was in contrast to the strong growth in profit per room in both 2014 (+12.5%) and 2015 (+24.8%).