Revenue, Profit Up at European Hotels to Start Year

It was a good start of the year for hoteliers in Mainland Europe. On the back of the positive results recorded in the last quarter of 2019, profit per available room achieved a 5.7% year-over-year increase in January 2020.

Revenue, Profit Up at European Hotels to Start Year
Courtesy/News Source: hotelnewsresource.com

It was a good start of the year for hoteliers in Mainland Europe. On the back of the positive results recorded in the last quarter of 2019, profit per available room achieved a 5.7% year-over-year increase in January 2020.

The rise in profits was led by a growing top-line. With a 0.6% YOY uptick in average rate and an increase of 2.4 percentage points in occupancy, RevPAR placed 4.9% above January of 2019. It was the leisure segment (travelers using discounted or weekend rates and packages) that contributed the most to this escalation in RevPAR, accounting for 33.2% of rooms revenue and 31.7% of occupancy. A further 1.6% YOY increment in non-rooms revenue resulted TRevPAR increasing 3.7% YOY.

Expenses were also on the rise, albeit at a slower pace than revenue. Total hotel labour costs recorded a 3.0% YOY increase in January, mostly due to rooms payroll (up 4.2% YOY), while overheads saw an uptick of 2.5% YOY.

In all, profit conversion in Mainland Europe was recorded at 20.9% of total revenue, a 0.4-percentage-point improvement compared to the same month of 2019. However, it remains to be seen if hoteliers will be able to further this positive trend in the coming months amid growing concerns over the spread of the coronavirus epidemic in the area.

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

KPI

January 2020 v. January 2019

RevPAR

+4.9% to €86.30

TRevPAR

+3.7% to €135.26

Payroll

+3.0% to €56.47

GOPPAR

+5.7% to €28.28

Berlin recorded its third consecutive month of profit per available room interannual growth in January, with a staggering 50.8% GOPPAR increase. Two major international events fueled Berlin’s strong performance: Berlin Fashion week, from the 13th to the 17th of January with approximately 70,000 visitors, and the International Green Week, spanning from the 18th to the 27thwith 40,000 attendees.

Average rate took center stage with a 7.5% YOY increase, its greatest jump since May 2019. Occupancy was also up by 1.2 percentage points, which resulted in a 9.4% YOY climb in RevPAR. In the F&B department, revenue surged by 6.4% compared to the previous year, totaling a 6.7% interannual increase in non-rooms revenue. As a result, TRevPAR recorded a YOY 8.4% upswing.

Hoteliers in Berlin did a great job at controlling costs despite the heightened activity, and the increases in total labour costs (up 1.9% YOY) and overheads (up 2.2% YOY) placed well below the top-line gains. Thus, profit conversion was recorded at 16.2% of total revenue, 4.5 percentage points above that of January 2019.

Profit & Loss Performance Indicators – Berlin (in EUR)

KPI

January 2020 v. January 2019

RevPAR

+9.4% to €86.40

TRevPAR

+8.4% to €138.22

Payroll

+1.9% to €53.43

GOPPAR

+50.8% to €22.42

For Lisbon hoteliers, 2020 had a rough start as profit per room plunged by 50.8% in January compared to the same month of the previous year. The Portuguese capital had already experienced performance bumps in 2019 as the number of visitors from the UK (one of the city’s major source markets) started to dwindle due to the devaluation of the British pound. On the back of this, the coronavirus outbreak and its severe contraction of Chinese visitors to the city dealt the final blow to GOPPAR growth expectations.

RevPAR suffered a 13.9% interannual fall, due to decreases in both occupancy (down 0.7 percentage points YOY) and rate (down 12.7% YOY). Non-rooms revenue wasn’t immune to the activity slump, falling by 12.7% YOY. The F&B department was particularly hit and recorded a 21.8% nosedive. As a result, TRevPAR placed 13.5% below January of 2019.

Downticks in expenses were not enough to compensate for the shrinking revenues, and even though total hotel labour costs were cut by 1.7% and overheads contracted by 4.3% YOY, the city’s profit margin receded by 10.7 percentage points compared to the previous year, to 14.0%.

Profit & Loss Performance Indicators – Lisbon (in EUR)

KPI

January 2020 v. January 2019

RevPAR

-13.9% to €64.39

TRevPAR

-13.5% to €101.00

Payroll

+1.7% to €41.71

GOPPAR

-50.8% to €14.17

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