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Profit slide continues for MENA Hotels

Hotels in the region have now recorded a YOY decline in profit in seven of the last 10 months.

Waning revenues and rising costs have conspired to hobble profit per room at hotels in the Middle East & North Africa, as GOPPAR in the region has slid by almost 40 percent over the last 36 months, according to the latest data tracking full-service hotels from HotStats.

Bucking the month-to-month downward trend, however, GOPPAR in October, at $77.16, was 104 percent higher than the previous month, but still an 8.1-percent year-over-year decline. Hotels in the region have now recorded a YOY decline in profit inseven of the last 10 months.

The decline this month was led by a 3.8-percent drop in RevPAR, the byproduct of a 5.2-percent decline in average room rate. Further declines were recorded across non-rooms departments, including food & beverage, down 3.7 percent on a per-available-room basis. TRevPAR for the month declined 4 percent to $205.09.

Profit & Loss Key Performance Indicators – Middle East & North Africa (in USD)

October 2018 v. October 2017

  • RevPAR: -3.8% to $120.25
  • TRevPAR: -4.0% to $205.09
  • Payroll: +0.9 pts. to 26.7%
  • GOPPAR: -8.1% to $77.16

The drop in revenue was further exacerbated by rising costs, which included a 0.9-percentage-point increase in payroll to 26.7 percent of total revenue, as well as a 0.9-percentage-point increase in overheads, which grew to 26.3 percent of total revenue.

As a result of the movement in revenue and costs, profit conversion at hotels was recorded at 37.6 percent of total revenue in October.

“As the market returned to a more commercial-led mix, hotels in the Middle East & North Africa would have expected some positive news following a pretty torrid period of trading during the summer; however, this did not transpire,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats.

In contrast to the wider Middle East & North Africa market, hotels in Egypt performed well, led by Cairo, where hotels recorded a 24.1-percent YOY increase in profit per room to $54.95 for the month. This represented the seventh month of the year in which hotels in the city recorded a YOY increase in GOPPAR.

In addition to a 22-percent increase in rooms revenue, the significant uplift in volume helped hotels in Cairo record strong growth in non-rooms departments, including food & beverage (up 25.2 percent) and conference & banqueting (up 23.2 percent), on a per-available-room basis.

As a result of the movement across all revenue centres, TRevPAR increased by 21.1 percent YOY to $106.36. This was further buoyed by a YOY drop in payroll, which fell by 1.5 percentage points to 15.8 percent of total revenue.

Profit conversion at hotels in Cairo soared to a lofty 51.7 percent of total revenue.

“Egypt is currently bucking the negative trend faced by hoteliers across much of the rest of the Middle East & North Africa, which is being led by robust economic growth forecast at 5 percent for 2018, with greater increases anticipated in 2019 and 2020,” said Grove. “After challenges in 2011, reform momentum is being sustained and the positive economic news will be welcomed by owners and operators.”

Profit & Loss Key Performance Indicators – Cairo (in USD)

  • October 2018 v. October 2017
  • RevPAR: +22.0% to $64.71
  • TRevPAR: +21.1% to $106.36
  • Payroll: -1.5 pts. to 15.8%
  • GOPPAR: +24.2% to $54.95

Festival fever fuels strong profit growth for Europe’s hotels
European hoteliers had cause for celebration in October, as hotels recorded a 6.1-percent year-on-year increase in profit per room. Performance was boosted by a number of major festivals hosted in key cities, according to HotStats.

Whilst GOPPAR levels actually dipped against September -dropping to 79.57 euros for the month, against 96.80 euros last month- the considerable year-on-year growth in October was sufficient to continue to drive a strong year-to-date increase in profit per room, which is now 9.8 percent above the same period in 2017.

Growth in profit this month was aided by a 6.1-percent increase in RevPAR, fuelled significantly by a 5.2-percent increase in achieved average room rate to 171.79 euros.

In addition to year-on-year growth in rooms revenue, hotels in Europe recorded a revenue increase across non-rooms departments, including Food & Beverage (up 0.6 percent) on a per-available-room basis, which contributed to the 3.6 percent uplift in TRevPAR this month to 197.42 euros.

Top-line performance was led by demand from the commercial sector, which accounted for almost 40 percent of all accommodated roomnights.

And whilst there was a decline in the achieved rate in the individual leisure segment in the month (down 2.4 percent), this was cushioned by year-on-year growth in rate in the residential conference (up 6.8 percent), corporate (up 0.6 percent) and group leisure (up 10.8 percent) segments.

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

  • October 2018 v. October 2017
  • RevPAR: +6.1% to 133.27 euros
  • TRevPAR: +3.6% to 197.42 euros
  • Payroll: -0.6 pts. to 29.7%
  • GOPPAR: +6.1% to 79.57 euros

The growth in revenue this month was complemented by cost savings, which included a 0.6-percentage-point reduction in payroll to 29.7 percent of total revenue – despite a 0.1-percentage-point increase in overheads to 20.2 percent of total revenue.

As a result of the movement in revenue and costs, profit conversion at hotels in Europe was recorded at 40.3 percent of total revenue in October.

“Profit performance for hotels in Europe is proving to be very consistent, with just two months of year-on-year GOPPAR decline recorded since October 2016,” said Michael Grove. “This is despite slowing economic growth across the Eurozone.”

Strong performance across the region was led by contribution from a number of key city markets that hosted major festivals and conferences.

The greatest margin of year-on-year performance growth was recorded in Munich, which hosts the renowned Oktoberfest. The 16-18 day festival annually attracts more than six million people, significantly driving up demand for hotel accommodations in the city. This year was no different, with hotels in Munich recording a 52.4-percent year-on-year increase in profit per room for the month to 132.38 euros, which is a high for 2018, and was 85.9 percent above the year-to-date GOPPAR of 71.22 euros.

The growth in profit was led by an increase across all departments, which included a 33.5-percent increase in RevPAR to €188.30, as room occupancy grew by 5.2 percentage points to 82.2 percent, and achieved average room rate soared by 25.0 percent to 229.11 euros.

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

  • October 2018 v. October 2017
  • RevPAR: +33.5% to 188.30 euros
  • TRevPAR: +29.4% to 248.99 euros
  • Payroll: -6.1 pts. to 21.1%
  • GOPPAR: +52.4% to 132.38 euros

The significant increase in revenue enabled huge cost savings to be made, which included a 6.1-percentage-point reduction in payroll to 21.1 percent of total revenue.

Beyond Octoberfest, the city was supported by a range of major international conferences hosted at the ICM–Internationales Congress Center Munchen, including the 2018 ESMO oncology conference, which attracted more than 24,000 attendees.

As a result of the robust top-line performance and reduction in costs, profit conversion at hotels in Munich was recorded at 53.2 percent of total revenue.

Outside Munich, hotels in Budapest also performed well in October, due in large part to the Hungarian capital hosting the city-wide CAFe Budapest Contemporary Arts Festival, which helped drive a 15.6-percent increase in RevPAR to 123.26 euros.

The growth in rooms revenue in the city was supported by increases in non-rooms revenues, including Food & Beverage (up 14.5 percent) and Conference & Banqueting (up 12.7 percent), which contributed to the 12.2-percent year-on-year increase in TRevPAR to 171.31 euros.

Falling costs, which included a 0.5-percentage-point decrease in payroll, to 22.1 percent of total revenue, added to the positive story for hotels in Budapest and equated into profit conversion of 47.7 percent of total revenue.

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

  • October 2018 v. October 2017
  • RevPAR: +15.6% to €123.26
  • TrevPAR: +12.2% to €171.31
  • Payroll: -0.5 pts. to 22.1%
  • GOPPAR: +17.1% to €81.75
Vicky Karantzavelou
Co-Founder & Chief Editor - TravelDailyNews Media Network | Website

Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales.

She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.

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