Latest News
HomeRegional NewsEuropeScant business at Europe’s hotels sends profit to historical low
Hospitality

Scant business at Europe’s hotels sends profit to historical low

Hoteliers in Europe did a good job at containing the impact of vanishing revenue on profit, achieving a 14.5-percentage-point increase in flex percentage on a month-over-month basis, from 38.7% in March to 53.2% in April.

According to HotStats, April was a month of virtually no business volume for Europe's hotels, as the coronavirus spread across the continent, prompting countries such as Spain, Italy and Russia to impose lockdowns in order to flatten the infection curve. The result was pain across the operating statement, with GOPPAR recording its historical low at -€17.86, a 132.0% decline compared to April of 2019.

With travel bans and mandatory stay-at-home orders in effect, occupancy fell by 69.7 percentage points YOY to single-digit levels, which, combined with a 44.1% drop in average rate, drove RevPAR down by 95.5%. The closure of F&B venues, as well as health clubs and spas, among others, thwarted the possibility of generating ancillary revenue to compensate for the rooms decline. As such, TRevPAR plunged 93.3% YOY.

Expenses also reflected the volume slump. Total labor costs were down by 70.4% YOY, led by cuts in rooms (down 73.5% YOY) and F&B (down 76.4% YOY). Overhead expenses shrunk as well, by 59.2% YOY, mainly due to a 94.1% nosedive in credit card commissions and a 79.7% decrease in Sales & Marketing expenses. Profit conversion was recorded at -156.3% of total revenue in April, placing 189.3 percentage points below the previous year.

Hoteliers in Europe did a good job at containing the impact of vanishing revenue on profit, achieving a 14.5-percentage-point increase in flex percentage on a month-over-month basis, from 38.7% in March to 53.2% in April. The flex percentage is an indicator that measures how efficient the operation is at saving costs to compensate for revenue declines. The higher the flex percentage, the better, as it shows that profit falls proportionately less than revenue. As a rule of thumb, a flex percentage of 50% is considered a good result in the industry, and achieving a level above that in such a short time is a testament to the quick reaction of hoteliers given the new paradigm.

Profit & Loss Performance Indicators – Total Europe (in EUR)
PINAKAS

Moscow
About two thirds of Russia's confirmed cases were concentrated in Moscow. In order to contain this, the government issued a nationwide “non-working month” in April, whereby nonessential businesses were ordered to close, and people were asked to self-isolate at home. The lockdown had a devastating impact on hotel profitability in the city, which recorded a 129.3% YOY drop in GOPPAR to -€20.71. This is the first profit-per-room negative value in Moscow since HotStats started tracking data in the market.

With occupancy down by 73.1 percentage points YOY and average rate falling by 35.2%, RevPAR in Moscow plummeted by 94.1% compared to April 2019. The closure of all other major revenue-generating outlets meant that there was barely any ancillary revenue, resulting in a 93.6% YOY plunge in TRevPAR.

Expenses were also on a downward trend in April. Total labor costs fell by 51.7% YOY and, with expenses down across all undistributed departments, overheads decreased by 49.9% YOY. As a result, profit conversion was recorded at -215.0% of total revenue, a 261.9-percentage-point drop from April of 2019.

Profit & Loss Performance Indicators – Moscow (in EUR)
PINAKAS

London
The UK also saw a ramp up of confirmed cases in late March and April, spurring the government to enforce a lockdown in order to tamper down the the contagion rate. For hoteliers in London, that translated into a virtual shutdown of their operations, and a 115.7% YOY fall in GOPPAR to a record low of -£10.94.

Quarantines and travel bans drove occupancy down by 73.9 percentage points YOY. Average rate also descended, down 52.2% YOY, and the combined effect of these metrics resulted in a 96.6% YOY decline in RevPAR. With all other revenue sources affected in the same manner, TRevPAR in April placed 90.6% below the same month on 2019.

Hoteliers in the city were able to slash expenses in the face of this unprecedented revenue contraction. Total labor costs were cut by 69.2% YOY, with a focus on operated departments such as Rooms (down 74.5% YOY) and F&B (down 75.1% YOY). Fueled by a 46.5% YOY decline in utilities and an 88.8% YOY fall in Sales & Marketing expenses, overhead costs were cut by 62.5% YOY.

In all, profit conversion was recorded at -63.7% of total revenue in April, 101.8 percentage points lower than the previous year.

Profit & Loss Performance Indicators – London (in GBP)
PINAKAS

Co-Founder & Chief Editor - TravelDailyNews Media Network | Website | + Posts

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.

Tags
29/03/2024
28/03/2024
27/03/2024
26/03/2024
25/03/2024
22/03/2024