SYgle>Industry Information>Strong Finish Punctuates Positive Year of Profit Growth for Hotels in Europe

Strong Finish Punctuates Positive Year of Profit Growth for Hotels in Europe

Column: industry Tag: European Chain Hotels,Hotels in Europe,Profit Growth Published: 2018-01-31 16:18 Source: HotStats Author:

Hotels in Europe recorded a 7.0% increase in profit per room in December, which concluded a positive year of performance for hotels in the region, according to the latest worldwide poll of full-service hotels from HotStats.

Hotels in Europe maintained their consistent growth this month, recording a 0.4 percentage point increase in room occupancy, to 59.8%, as well as a 4.2% increase in achieved average room rate, to €145.26, which contributed to the 4.9% year-on-year increase in RevPAR, to €86.87.

In addition to the growth in Rooms Revenue, hotels in Europe recorded an increase in Non-Rooms Revenues, including Food & Beverage (+3.5%), Conference & Banqueting (+4.9%) and Leisure (+1.9%), on a per available room basis, which contributed to the 4.2% increase in TrevPAR, to €144.70.

Despite room occupancy levels in December being well below the annual performance, hotels in Europe were able to successfully record increases in achieved average rate across a number of segments, including Residential Conference (+3.8%), Corporate (+9.4%) and Individual Leisure (+6.7%).

Profit & Loss Key Performance Indicators – Europe (in EUR)

December 2017 v December 2016

RevPAR: +4.9% to €86.87

TrevPAR: +4.2% to €144.70

Payroll: +1.2 pts to 38.6%

GOPPAR: +7.0% to €37.11

Whilst hotels in Europe suffered an increase in costs, which included a 1.2-percentage point uplift in Payroll, to 38.6% of total revenue, GOPPAR levels increased by 7.0% year-on-year, to €37.11. This is equivalent to a profit conversion of 25.6% of total revenue.

In line with the positive performance of the European hotel market, just over two years on from the terrorist attacks which rocked the French capital, hotels in Paris have recovered well and returned to their rightful position as one of the top markets in the region.

The recovery in the performance of hotels in the French capital has been led by a return to the volume of business and leisure visitors to the city, which this month was illustrated by the 6.4-percentage point uplift in room occupancy, to 63.5%.

In addition, achieved average room rates at hotels in the French capital remain amongst the highest in Europe, reaching €350.66 in December, further to a 5.1% year-on-year increase. As a result, RevPAR at hotels in Paris increased by 16.7% this month, to €222.51.

Profit & Loss Key Performance Indicators – Paris (in EUR)

December 2017 v December 2016

RevPAR: +16.7% to €222.51

TrevPAR: +13.9% to €370.34

Payroll: -1.0 pts to 45.0%

GOPPAR: +63.5% to €82.56

As well as the strength of the contribution from Rooms Revenue, the revenue mix at hotels in Paris is supported by robust Non-Rooms Revenues, which comprised approximately 40% of total revenue in December. And with increases recorded across a number of ancillary departments, hotels in Paris successfully achieved a 13.9% increase in TrevPAR, to €370.34.

“Following a short period of uncertainty after the terrorist attacks in November 2015, Paris has reclaimed its position as a global hub, illustrated by the buzz in the French capital this month. This was not only due to the visitation of more than 50 world leaders for the One Planet Climate Summit, but also due to the recovery in the leisure segment, with Paris re-establishing its profile as an extremely popular Christmas destination,” said Pablo Alonso, CEO of HotStats.???

Despite the strong top line performance, profit levels at hotels in Paris remain hampered by high Payroll levels, which, in spite of a 1.0-percentage point decline in December, remain high at 45.0% of total revenue.

As a result, profit conversion at hotels in the French capital are comparatively low at 22.3% of total revenue, but at €82.56 GOPPAR levels this month were 63.5% up on the same period in 2016.

In contrast to the performance of hotels in Paris, it was a tough end to a frustrating year for hotels in Rome, as revenue and profit levels fell away.

Whilst hotels in the Italian capital were able to record a 7.8% increase in achieved average room rate in December, to €193.72, it was completely wiped out by a 7.3-percentage point decline in room occupancy, to a lowly 46.1%. As a result, RevPAR at hotels in Rome fell by 7.0% year-on-year, to €89.32.

Profit & Loss Key Performance Indicators – Rome (in EUR)

December 2017 v December 2016

RevPAR: -7.0% to €89.32

TrevPAR: -7.9% to €151.37

Payroll: + 6.6 pts to 54.8%

GOPPAR: -27.4% to €7.72

The drop in volume meant that hotels in Rome were always going to struggle to maintain Non-Rooms Revenue levels, which fell by a considerable margin, including Food & Beverage (-10.2%) and Conference & Banqueting (-14.7%) on a per available room basis. The decline in these measures contributed to the 7.9% drop in TrevPAR, to €151.39.

In addition to declining revenue levels, profit levels were further hit by increasing costs, which were led by a 6.6-percentage point increase in Payroll, to 54.8% of total revenue.

As a result, GOPPAR at hotels in Rome fell by 27.4% in December to just €7.72. This is equivalent to a profit conversion of only 5.1% of total revenue.

“The Rome hotel market is heavily reliant on the leisure segment, which typically falls away during December, which always leaves revenue levels floundering. However, owners and operators in the Italian capital will be disappointed that rising costs have almost entirely wiped out profit levels this month,” added Pablo.

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