SYgle>Industry Information>TrevPAR Grows but Profits Slide at US Hotels in July

TrevPAR Grows but Profits Slide at US Hotels in July

Column: industry Tag: US Hotels,TrevPAR,hotel performance Published: 2017-09-06 14:13 Source: Author:

GOPPAR dropped by 0.7-percent at hotels in the USA this month, as the 1.1-percent increase in TrevPAR was cancelled out by escalating costs, according to the latest poll of full-service hotels from HotStats.

Although year-on-year growth in RevPAR at hotels in the USA remained flat this month, at $157.48, an increase in non-rooms revenues, including Food and Beverage (+2.0-percent) and Conference and Banqueting (+1.5-percent), meant that a 1.1-percent increase was recorded in TrevPAR, to $234.20.

That said, in spite of the year-on-year increase, the TrevPAR achieved this month was the second lowest of the year so far, behind only January ($225.52), and 8.3-percent below the year-to-date average, at $255.32.

July is not a particularly strong month of performance for hotels in the USA, as the start of the summer holidays typically heralds a decline in demand from the high-yielding corporate and residential conference segments. This is evidenced by the proportion of rooms revenue from the commercial segment falling to just 37.4-percent in July, against a year-to-date average of 44-percent.

Profit & Loss Key Performance Indicators-USA(in USD)

July 2017 vJuly 2016

RevPAR: +0.0% to $157.48

TrevPAR: +1.1% to $234.20

Payroll: + 1.9 pts to 35.7%

GOPPAR: -0.7% to $83.41

Despite the increase in TrevPAR, rising costs, which included a 1.9-percentage point increase in labor to a lofty 35.7-percent, meant GOPPAR for July dropped by 0.7-percent, to $83.41.

"With performance dipping during the summer, it is undoubtedly a challenging period for hotels in the USA to postprofit uplift, particularly as they are carrying the cost burden from the rest of the year when top line performance ismore buoyant.

"And,having worked hard to achieve an increase in total revenue this month, hotel owners and operators will be particularly disappointed that this has been entirely wiped out by rising costs," said Pablo Alonso, CEO of HotStats.

In contrast to the USA overall, July was a positive month of performance for hotels in San Diego, which was primarily due to the significant uplift in demand associated with the Comic Con convention.

Whilst RevPAR at hotels in San Diego for the month was 0.2-percent behind the same period in 2016, at $228.73, it was 15.5-percent above the year-to-date average ($198.01)?and a peak so far in 2017.

Profit & Loss Key Performance Indicators - San Diego (in USD

July 2017 v July 2016

RevPAR: -0.2% to $228.73

TrevPAR: + 1.6% to $333.27

Payroll: +3.2 pts to 25.0%

GOPPAR: -1.3% to $168.94

In addition to San Diego being an extremely popular tourist destination, attracting approximately 34 million visitors annually, Comic Con is reportedly the largest event of its kind in the world and provides a welcome boost to hotel demand each year in July.

Despite the year-on-year decline in RevPAR, hotels in San Diego recorded growth in non-rooms revenues, which contributed to a 1.6-percent increase in TrevPAR, to $333.27, with non-rooms revenue contributing 31.3-percent to total revenue.

"Thanks to Comic Con, San Diego was one of the top performing hotel markets in the USA in July. With the event reportedly injecting approximately $80 million of direct spending into the city, San Diego hoteliers will be keen that it returns year after year," added Pablo.

However, hotels in San Diego are suffering the impact of an increase in minimum wage levels, introduced at the beginning of 2017. This month they contributed to the 3.2-percentage point year-on-year increase in labor costs, to 25.0-percent of total revenue. As a result of rising costs, GOPPAR at hotels in San Diego fell by 1.3-percent for July, to $168.94.

Conversely, despite its strong profile as a tourism destination, the summer is one of the lowest periods of performance for hotels in Miami as other destinations are favored over the Floridian heat and humidity.

This is illustrated by GOPPAR dropping to a year-to-date low of just $40.76 in July, equivalent to 24.9-percent of total revenue. The decline in bottom line performance was led by plummeting top line revenues, with RevPAR falling to just $110.96, 26.9-percent below the year-to-date average of $151.55.

Whilst a drop in demand has impacted key performance metrics in July, profitability at Miami hotels is also being challenged by a slew of additions to hotel stock, which have included the 182-bedroom Washington Park Hotel, 210-bedroom Eden Roc and 129-bedroom ME Miami.

Profit & Loss Key Performance Indicators - Miami (in USD)

July 2017 v July 2016?

RevPAR: -6.9% to $110.96

TrevPAR: -5.9% to $163.67

Payroll: +1.9 pts to 40.3%

GOPPAR: -14.0% to $40.76

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