Hotels in Paris had a dramatic jump in profitability - during the first three months of this year, according to a monthly survey of 10 European cities conducted by TRI Hospitality Consulting.
The French capital saw a sample of its chain hotels enjoy a 28.7 per cent hike in profits, as measured by income before fixed charges, in the HotStats survey.
Despite this rise, however, hotels in top placed Moscow were almost twice as profitable, delivering an IBFC per available room of Eu128.09 compared to third placed Paris at Eu65.52. Only hotels in London came close to matching the profitability of Moscow with an IBFC PAR of Eu105.03.
Behind Moscow's success is high revenue per available room – the third best in the survey – and in particular, very low wage costs. Payroll in Moscow is just 20.9 per cent of sales where as in Paris it is almost twice as much at 40.7 per cent.
"The best revpar performance will not always deliver the best profits. Hoteliers have to keep costs in check to extract the best operating return," said David Bailey, director of TRI Hospitality Consulting.
London has highest revpar
The best revpar performance was in London which hit Eu153.45. Paris and then Moscow followed. Moscow, however, showed the best growth in revpar with a 21.3 per cent rise, well ahead of second placed London's rise of 13.3 per cent.
The rise in revpar at Moscow was entirely down to rising room rates which leapt 23.2 per cent, making them the highest in the sample at Eu209.58. Occupancy in Moscow shrank slightly, down 0.9 percentage point to just 59.6 per cent the third worst out of the 10 cities.
Paris had the best rise in occupancy, up 4.6 percentage points to 75.1 per cent. This left it in third place in occupancy terms, behind London, which was the strongest occupancy performer, and Amsterdam.
"Despite poor occupancy, Moscow's hoteliers have been able to drive rate harder than in any of the other cities. The challenge will be continuing to push rate without causing occupancy to drop even further," said Bailey.
Budapest is top of the flops
The Hungarian capital Budapest saw profit at its hotels almost halve during the first three months, year-on-year. The drop from Eu22.10 to Eu12.36 left the average chain hotel room in Budapest generating a tenth of the profit of the average room in Moscow.
The main cause of the profit collapse was a 6.5 percentage point increase in payroll costs to 41.2 per cent of sales, the second worst in the survey.
Revpar was also the weakest in the survey at Eu49.17, just a third of that achieved in London. The drop in revpar at Budapest was only the third worst however, with both Prague and Hamburg performing worse.
"Budapest is suffering a double whammy of falling revpar and rising wage costs. This hit its profitability dramatically," said Bailey.
For more information contact David Bailey on +44 (0)20 7486 5191 or email David.Bailey@trihc.com.