The trend of falling occupancy, revenue and profit across key European hotel markets continued during January, according to the latest survey.

In Vienna the sample of international branded hotels saw daily profit – expressed as income before fixed charges (IBFC) – decline by nearly two thirds to just €9.80 per available room.

In Prague profit more than halved and in Amsterdam the decline was 45.2 per cent. The only city in the survey not to report a double-digit decline in profit was Hamburg.

"There has been considerable supply growth in both Vienna and Prague since January 2008. More than 2,000 extra graded bedrooms entered the Vienna market and at least 800 branded hotel rooms opened in Prague. Combined with the decline in overnights from these cities' key source markets (Germany, the UK, and the US) all of which are now firmly in recession, the growing number of bedrooms is diluting performance," said Jonathan Langston, managing director, TRI Hospitality Consulting.

Vienna payroll exceeds 50 per cent

The factor which pushed Vienna's profitability further into the red was its traditionally high labour costs. Payroll increased 8.3 percentage points to 55.5 per cent of total revenue. In Amsterdam, payroll rose from 37.4 to 43.9 per cent of total revenue.

"The fixed payroll component tends to take up a greater percentage of total revenue at the start of the year when sales are generally at their weakest. This January's year-on-year falls in revenue have heightened this trend further, particularly in Austria which has strong labour laws and a high standard of living," said Langston.

Although relatively high, payroll costs were at their most stable year-on-year in Germany. Berlin and Hamburg both reduced the payroll percentage despite falls in revenue and profit.

London drops room rates Paris and London reported similar falls in occupancy and profit. Occupancy was down 3.3 percentage points to 70 per cent in London and in Paris down by 3.5 points to 69.3 per cent. Profit fell back by 20.6 per cent in Paris and 21.5 per cent in London.

There was greater discounting in the London market, however. Average room rate dropped by 8.4 per cent in the UK capital compared to -3.7 per cent in Paris. Relatively high reductions to rack, corporate, conference and leisure rates meant that London slipped from its historical place as the most profitable city in the survey.

In absolute terms, Paris had the highest average room rate and the best room revenue performance making it number one for profit with daily IBFC of €55.13 per available room.