Any concern over a weakening US economy has not yet infiltrated US hotel industry profits, while Mainland European hotels generated revenue in August; they just had trouble holding onto it.
GOPPAR increased 1.4% year-over year in August, matching RevPAR growth, which also clocked in with a positive 1.4% gain, according to monthly data from HotStats.
August continued a streak of GOPPAR growth in 2019, with the only negative blip coming in April, when GOPPAR was down 4.5% YOY.
Despite a YOY increase, the $76.95 GOPPAR was 24% below the year-to-date average of $101.21.
While RevPAR was up for the month, occupancy was down 0.2 percentage points, but bolstered by a 1.7% gain in average room rate.
Total revenue per available room was up 2.2% for the month. Profit conversion came in at 32.8% of total revenue in August, negatively affected by a 3.4% YOY increase in payroll on a per-available-room basis.
Profit & Loss Key Performance Indicators – U.S. (in USD)
“U.S. hoteliers continue to drive profits despite contending with monthly rises in expenses,” said David Eisen, Director of Hotel Intelligence, Americas, HotStats. “With costs including labor and A&G rising in August at a rate higher than RevPAR, it’s become even more critical that costs are flexed in order to maintain profit levels.”
In New York, occupancy, room rate, RevPAR and TRevPAR were all up YOY, but it still translated into a 6.0% drop in GOPPAR, as labor costs jumped a precipitous 10.5% YOY in the month.
While demand for New York hotels consistently translates into some of the highest occupancy rates and room rates in the U.S., the city is invariably besieged by rises in hotel supply. According to Lodging Econometrics, 65 new hotels/9,396 rooms will open in the city in 2019.
With over 65 million visitors annually, the leisure segment makes a significant contribution to accommodation demand for hotels in New York and comprised more than 43% of total demand in August.
Profit & Loss Key Performance Indicators – New York City (in USD)
In contrast to the challenges in the Big Apple, it was a positive month of profit performance for hotels in Houston, which came despite recording a 1.2% YOY decline in RevPAR to $80.99.
Some of the RevPAR losses were recouped by hoteliers recording an increase in ancillary revenues, which were led by a 2.9% increase in food & beverage, and tempered the 0.8% decline in TRevPAR to $116.17. August is historically the lowest TRevPAR month in Houston.
However, cost savings in payroll (down 0.3%) and overheads (down 7.9%) helped hotels in the city record a 16.4% YOY increase in profit per room.
Profit & Loss Key Performance Indicators – Houston (in USD)
RevPAR Up, GOPPAR Down at Hotels in Mainland Europe
Mainland European hotels generated revenue in August; they just had trouble holding onto it. Despite a 0.9% year-over-year increase in RevPAR, coupled with 0.4% growth in TRevPAR, GOPPAR for the month turned negative, down 0.8% YOY, according to data from HotStats.
Further worrisome, the profit decline is becoming more a trend than a blip: The 0.8% drop in GOPPAR was a third consecutive month of YOY decline and seventh month this year. The only positive YOY growth in this measure was in May, when it was up 5.8% YOY.
Rising costs had a hand in the profit decrease. Payroll on a per-available-room basis was up 1.1% YOY and overheads were up 2.3%.
RevPAR in the month was led by a 0.2-percentage-point increase in room occupancy to 79%, as well as a 0.6% increase in achieved average room rate, which grew to €167.72.
However, a 0.7% YOY decline in ancillary revenues, led by a 1.1% drop in food & beverage revenue, dampened the growth in total revenue, reflected in the 0.4% TRevPAR growth rate to €183.72.
Profit & Loss Key Performance Indicators – Mainland Europe (in EUR)
“Strong growth in average room rate, resulting in positive RevPAR growth, has been the catalyst for increased profit at hotels in mainland Europe for a number of years,” said Michael Grove, Managing Director, EMEA, HotStats. “However, a global concern continues to be weakening RevPAR growth, which combined with rising costs, is squeezing profits.”
For hotels in Dublin, August represented an eighth consecutive month of profit decline, as the Irish capital contends with additions to hotel supply.
The 11.4% YOY decline this month contributed to the ongoing decrease in profit at hotels in the city, which was recorded at -10.7% in the eight months to August 2019 and is a significant change in trajectory from the period of substantial annual GOPPAR growth since 2015.
The drop in profit this month was led by a 6.2% decrease in RevPAR, which was primarily due to a 7.0% YOY decline in average room rate, which has been on the decline since the beginning of 2019.
Despite the YOY decline in August, profit per room at hotels in Dublin remained relatively robust at €104.27, which was 18.3% above the YTD figure, illustrating the appeal of the Irish capital as a leisure destination.
Profit & Loss Key Performance Indicators – Dublin (EUR)
Eastward, hotels in Prague continued to enjoy a strong period of trading in 2019, as GOPPAR grew by 10.4% YOY to €52.69.
Prague remains a popular visitor destination and the leisure segment comprised 56.8% of roomnights sold in August.
An increase in volume and price helped fuel a 7.3% YOY increase in RevPAR to €86.63, which was supported by growth in ancillary revenues, including an 18.8% uplift in food & beverage revenue.
The only blight on a strong performance was the 10.1% increase in payroll to €31.04 per available room, as hotels in Prague continue to battle with this rising cost.
Nevertheless, August will be noted as a positive month of performance, with profit conversion recorded at 42.5% of total revenue.
Profit & Loss Key Performance Indicators – Prague (EUR)