Despite the majority of the sample cities benefiting from a growth in volume in December, 2009 has proved to be a tough year across Europe with Gross Operating Profit per Available Room (GOPPAR) declining by more than 30% in half of the sample cities.

Prague hoteliers experienced a growth in room occupancy levels in December for only the second time in 2009, by 2.6 percentage points, to 54.6%. The glimpse of optimism in the Czech capital was further encouraged by a growth in profitability for the first time since January 2008, as a result of a 6.5% decline in payroll, which was culled to a thrifty 22.6% of total revenue.

The positive performance in December was, however, overshadowed by the sobering headline performance for Prague in 2009. The impact of a drop in visitor numbers, a significant increase in competitive hotel supply and a prolonged recessionary period all contributed to a decline in profitability of more than 35%.

Despite a room occupancy growth in Vienna of more than six percentage points in December, to 80.3%, the city suffered the largest monthly decline in average room rate across the sample, 13%, which resulted in a decline in Revenue per Available Room (RevPAR), to €124.09. The late surge in room occupancy growth in the Austrian capital was at the significant expense of room rate, which in the conference sector was down by approximately 35% in December.

"Looking back to 12 months ago, it was easy to recommend the idealistic preservation of room rates to hotel managers. However, double-digit declines in volume in the third quarter of 2008 and into 2009, incited the inevitable reaction of dramatic discounting throughout Europe. The challenge for many cities in 2010 will be to repair the damage and try to rebuild," said Jonathan Langston, managing director, TRI Hospitality Consulting.

London lights up in December

With a growth in GOPPAR of more than 23%, London was once again the leader of the pack in December and has subsequently minimised its annual decline in profitability to just 3.4%, compared with 2008.

The moderated decline has been helped by hoteliers minimising the decrease in average room rate to approximately 6%, to €147.41, but more importantly, due to a 1.7 percentage point increase in room occupancy levels, to finish the year at 83.9%.

In 2009, as a result of its stalwart performance, London achieved the highest RevPAR in our sample of cities, at €123.67. The UK capital also achieved the highest GOPPAR in 2009, at €86.43, approximately 44% higher than the second most profitable city, Amsterdam, at €59.92.

"A growth in room occupancy during the downturn goes against all the odds and London's performance is particularly impressive compared to the drop of almost 12 percentage points in the city during the last recession in 1990. The capital has undoubtedly benefited from the weak pound, but London hoteliers are to be applauded for their bullish management throughout the year," added Langston.

Payroll impacting the bottom line in European cities

The Working Time Directive of the European Union would have appeared to have had a profound impact on the profitability of hotels across Europe during 2009 and particularly in December, according to the latest HotStats survey from TRI Hospitality Consulting.

As hoteliers in Berlin, London, Munich, Prague and Warsaw were able to get the most out of their employees with a maximum 48-hour plus working week, hotel managers in Belgium, Austria and the Netherlands, who have ‘opted out' of the directive, seem likely to have been constrained by a maximum working week of 36 to 40 hours, with France currently resigned to employees working only 35 hours per week.

The benefits of flexibility in the payroll department are apparent. In December 2009, both Berlin and Prague recovered from a decline in revenue to end the year with a growth in GOPPAR, thanks to a reduction in payroll as a percentage of total revenue.