SYgle>Industry Information>Plummeting Room Rates Threaten Profit Levels at Abu Dhabi Hotels

Plummeting Room Rates Threaten Profit Levels at Abu Dhabi Hotels

Column: industry Tag: Abu Dhabi Hotels Published: 2017-05-12 11:00 Source: Author:

The decline in achieved average room rate In March continues the downward trajectory in this measure, which has been unrelenting, falling by 16.6 per cent over the past 36 months to $135.29 in the 12 months to March 2017 from $162.27 during the same period in 2013/14, with the drop accelerating in Q1 2017.

This is despite the country’s economic minister forecasting economic growth of between 3.5 to 4.0 per cent in 2017 and the Abu Dhabi Tourism and Culture Authority expecting the growth in the number of visitors to the city to exceed last year’s increase of eight per cent.

As a result of falling top line revenues, hotels in Abu Dhabi have struggled to maintain profitability, with profit per room falling by 27.0 per cent over the last 24 months to $54.42 in the 12 months to March 2017.

TrevPAR Grows But Profit Drops As Amman Hotels Struggle to Contain Costs

Despite recording a 1.0 per cent increase in total revenue this month, hotels in Amman suffered a 6.1 per cent decline in profit per room as costs continue to escalate.

Whilst hotels in the Jordanian capital successfully recorded a 3.0 per cent year-on-year increase in room occupancy, to 59.2 per cent, this was cancelled out by a 6.3 per cent decline in achieved average room rate, as a result Amman hotels recorded a 1.3 per cent year-on-year drop in RevPAR, to $86.60.

Despite the decline in Rooms Revenue, Amman hotels were buoyed by a 1.0 per cent increase in TrevPAR (Total Revenue per Available Room) to $142.09, fuelled by increases in non-rooms revenue, including Food and

Beverage (+4.7 per cent) and Conference and Banqueting (+1.2 per cent) on a per available room basis.

However, costs are escalating, illustrated by the increase in both Payroll (+2.2 per cent) and Overheads (+6.5 per cent) this month and this situation is unlikely to improve in the short term as the government recently announced a tax increase on fuel prices as well as a number of commodities to combat its budget deficit.

As a result of increasing costs cancelling out the growth in total revenue, profit levels at hotels in Amman fell by 6.1 per cent year-on-year in March, to $47.83 per available room.

Profit Grows at Beirut Hotels as Demand Thrives in Q1 2017

Hotels in Beirut have a had a strong start to the year, recording a 21.0 per cent year-on-year increase in profit per room in Q1 2017, which has been on the back of a 7.2 per cent increase in RevPAR, as Lebanon welcomed a new government.

The top line growth at hotels in Beirut in March was primarily fuelled by the 10.1 per cent year-on-year increase in room occupancy, resulting in a 17.1 per cent increase in RevPAR, to $73.38.

Despite a 2.9 per cent increase in Overheads, hotels in Beirut successfully recorded a 49.5 per cent increase in profit per room for the month, which contributed to a 21.0 per cent increase in this measure for Q1 2017, marking a very strong start to the year.

At $24.73 in the 12 months to March 2017, the profit per room at Beirut hotels represents a peak in recent years and is equivalent to an increase of 4.5 times over the last 36 months, from just $4.45 during the same period in 2013/14.

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