European chain hotels market review

Paris Hotels Suffer Profit Drop in Wake of Terrorist Attacks

Paris Hotels Suffer Profit Drop in Wake of Terrorist Attacks

Year-on-year profit per room at full-service hotels in Paris dropped by 19.0% this month, as the terrorist attacks, which took place on 13 November, were the root cause of a substantial decline in demand for hotel accommodation, according to the latest data from HotStats.

November is typically a buoyant month of performance for hotels in Paris with occupancy levels in the mid to high 70s and strong achieved average room rates, but this year the events which took place in the French capital triggered a 10.6 percentage point decline in room occupancy, to 64.4% from 75.0% during the same period in 2014. A decline in visitor numbers in the wake of the attacks was predictable, as was the cancellation of major conferences and exhibitions as security concerns remained. The impact on visitors to the city is illustrated by the 17.5% decline in the number of accommodated leisure room nights recorded in our sample of 37 Parisian hotels, equivalent to a drop of more than 6,000 leisure room nights for the month.

However, the negative impact of the attacks on demand was somewhat offset as the worldโ€™s media descended on the city in the aftermath of the events, which, in addition to the shift in demand sources, contributed to a 12.1% year-on-year increase in achieved average room rate, to โ‚ฌ321.92. As a result, the RevPAR (Revenue per Available Room) decline for the month was managed at just -3.8%.

Reactive adjustments in costs helped to minimise the impact of the top line decline on profit. However, labour costs were recorded at 49.2% of total revenue for the month, against 46.9% in November 2014. As a result of the movement in revenue and costs, profit conversion at hotels in Paris declined to 16.7% of total revenue this month from 19.5% during the same period in 2014.

Big Events Boost Barcelona Hotels Profit for November

Hotels in Barcelona achieved a 16.0% increase in profit per room for the month of November, which was primarily as a result of the 12.6% uplift in RevPAR to โ‚ฌ127.58, as the cityโ€™s key conference and event facility, Fira Barcelona, hosted several major events.

The Microsoft Convergence EMEA 2015, Smart City Expo World Congress 2015 and the Gamification World Congress 2015, had a combined attendance of more than 20,000 delegates. Whilst these are all annual events, in addition to the Smart City Expo moving to November from September this year, the growth in their popularity has helped to fuel increases in demand enabling Barcelona hoteliers to leverage price, particularly in the Best Available Rate Segment in which the sector rate increased by 23.3% to โ‚ฌ93.92.

The strong headline performance contributed to a 16.0% increase in GOPPAR (Gross Operating Profit per Available Room) for the month, to โ‚ฌ95.13, with Barcelona hotels converting at a strong 43.2% of total revenue. Thanks, in part, to the strong performance this month, hotels in Barcelona are on course to achieve a GOP increase of more than 11.0% in 2015, which is further to the 6.4% increase in 2014.

Perfect Storm Fuels Massive Bottom Line Growth for Hotels in Prague

Despite November being one of the slowest months of profit growth, at just +2.6% year-on-year, hotels in Prague have recorded a 22.0% increase in GOPPAR for the 11 months to November 2015, to โ‚ฌ49.41 from โ‚ฌ40.50. The growth in profit per room has primarily been as a result of a 16% increase in RevPAR, as hotels in the Czech capital have achieved growth in both volume and price.

In addition to the significant recent additions to supply now being absorbed, Prague hoteliers are benefiting from the strong current economic profile of the Czech Republic, with year-on-year GDP growth projected at more than 4.0%, as well as record inbound tourist numbers.

As a result, Prague hoteliers are shaping up to follow the 23.6% increase in GOPPAR in 2014 with a profit per room increase of more than 20.0% in 2015.

European chain hotels market review

Profits at hotels in Vienna and Warsaw were both hit by significant declines in average room rate (ARR) in 2013, according to the latest HotStats.

Profits at hotels in Vienna and Warsaw were both hit by significant declines in average room rate (ARR) in 2013, according to the latest HotStats.

In 2013, hotels in the Austrian capital saw a decline in all segment rates with falls in BAR (-7.2%), Corporate (-5.5%), Residential conference (-9.8%), Leisure (-4.5%) and Tours/Group (-8.4%) leading to an overall 7.9% drop in ARR. Although occupancy went up by 0.4 percentage point to 71.6%, RevPAR diminished by 7.4% to โ‚ฌ93.96.

With ancillary departments also posting a reduction, total revenue per available room (TRevPAR) decreased by 6.3% to โ‚ฌ145.20. Despite overheads per available room reducing, rising payroll and operating costs contributed to a 16.8% decline in gross operating profit per available room (GOPPAR).

Unsurprisingly, Warsaw posted a negative year-on-year comparison as its 2012 results were boosted by the 2012 FIFA European Championships. Indeed, despite a 7.1 percentage points surge in Occupancy to 78.6%, hoteliers in the Polish capital recorded a 14.4% drop in ARR to โ‚ฌ90.22 leading to a 6.0% decline in RevPAR. A general decrease in non-rooms revenues contributed to a negative year-on year TRevPAR performance (-5.2%). With operating costs also increasing, departmental operating profit per available room (DOPPAR) decreased by 8.2% to โ‚ฌ72.64. Although overheads remained flat, payroll rose by 1 percentage point and gross operating profit per available room decreased by 10.2% to โ‚ฌ46.65 for 2013.

Budapest and Hamburg post revenue and profit increase in 2013

Budapest hotels registered positive movements in 2013 across all key performance indicators with increases in occupancy (1.0 percentage points) and ARR (2.5%) contributing to a 3.9% rise in RevPAR. With TRevPAR growing by 3.4% and payroll decreasing by 0.4 percentage points, GOPPAR improved by 7.9% to โ‚ฌ30.69.

But in December hoteliers in the Hungarian capital experienced a more difficult end to the year with a surge in ARR of 9.2% at the expense of the occupancy, which declined by 4.7 percentage points. Negative year-on-year performances in non-rooms departments cancelled out a 1.0% increase in RevPAR and caused TRevPAR to decline by 4.6%. Falling F&B profit conversion (8.8 percentage points) and rising payroll reduced profit conversion to 22.5% and GOPPAR fell by 7.3% to โ‚ฌ17.16.

In 2013, hotels in Hamburg achieved positive performances with a 1.1% decline in ARR being the only exception. With occupancy reaching a high level to 81.5% (+4.2 percentage points), RevPAR and TRevPAR grew respectively by 4.3% and 3.7% whilst hoteliers managed to reduce payroll by 0.6 percentage point. As a result, GOPPAR improved by 5.7% to โ‚ฌ54.49.

Dusseldorf: revenue up but profit downโ€ฆ

Dusseldorf grew RevPAR by 1.4% for the year driven by a 2.1 percentage point uplift in occupancy and despite a 1.8% fall in ARR. As beverage per available room rose by 4.4% as well as sales from food and meeting room hire, TRevPAR registered a 1.5% growth to โ‚ฌ132.83. However, profit conversion diminished from 36.7% to 35.8% because overheads and payroll increased causing GOPPAR to fall by 0.9% to โ‚ฌ47.59.

In December, hoteliers in the German city experienced a tough end to the year. Indeed, despite RevPAR increasing by 1.2%, TrevPAR and GOPPAR reduced by 4.5% and 6.8% respectively compared to the same month in 2012, demonstrating yet again the need to look beyond RevPAR to see the true performance picture.

The hotels profiled in this report are drawn from the HotStats database and reflect the portfolios and distribution of the hotel chains that we survey and which operate primarily in the four and five-star sectors.

Please note: The data samples are reviewed and rebased each year to reflect the changes in the HotStats survey base. As a result, performance ratios published last year may differ from those contained within this report.

Occupancy (%) is that proportion of the bedrooms available during the period which are occupied during the period.

Average Room Rate (ARR) is the total bedroom revenue for the period divided by the total bedrooms occupied during the period.

Room RevPar (RevPAR) is the total bedroom revenue for the period divided by the total available rooms during the period.

Total RevPar (TRevPAR) is the combined total of all revenues divided by the total available rooms during the period.

Payroll % is the payroll for all hotels in the sample as a percentage of total revenue.

GOPPAR is the Total Gross Operating Profit for the period divided by the total available rooms during the period.

About the author

Avatar of Linda Hohnholz

Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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