European hotels: Revenues up, profits down

European hotels: Revenues up, profits down

In a clear example that revenue and profit aren’t always aligned, revenue per available room (RevPAR) at mainland European hotels attained a high for the year in June, but gross operating profit per available room (GOPPAR) fell.

Falling ancillary revenues and rising costs stymied gains made in rooms from flowing through to the bottom line, according to the latest data tracking full-service hotels.

At €158.82, RevPAR was a high for 2019 and also exceeded the previous peak of €157.09 from June 2018.

The spike was led by a 1.4-percentage-point year-on-year increase in room occupancy to 82.5%, and was in spite of a 0.5% decline in achieved average room rate, which fell to €192.61.

However, the growth in RevPAR was cancelled out by falling ancillary revenues, which included a decline in Food & Beverage (down 3.2%) and Conference & Banqueting (down 11.2%), on a per-available-room basis.

This contributed to the 0.5% YOY decline in TRevPAR to €226.66, which was further hit by rising costs that included a 2.2% increase in payroll to €62.25 per available room.

As a result, profit per room fell by 2.8% in the month to €101.00.

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

KPI June 2019 v. June 2018
RevPAR +1.1% to €158.82
TRevPAR -0.5% to €226.66
Payroll +2.2% to €62.25
GOPPAR -2.8% to €101.00

“June was the perfect example of why strong rooms revenue doesn’t always equate into a strong bottom line,” said Michael Grove, Managing Director, EMEA, at HotStats. “It’s never enough to rely on top-line growth. Hoteliers have to keep an eye on cost and focus on growing revenue streams in areas beyond rooms.”

Paris, for one, bucked the profit trend in June. GOPPAR levels there soared by 23.5% on the back of the 53rd Paris Air Show, the largest air show and aerospace-industry exhibition in the world.

The biennial event welcomed more than 315,000 visitors and helped hoteliers in the city leverage a 16.4% YOY increase in achieved average room rate, which hit €472.86. This was more than €120 above the YTD average at €352.26.

A 19.5% increase in RevPAR fuelled a 10.6% YOY increase in TRevPAR to €568.66, and came despite an 8.2% decline in ancillary revenues, which fell to €151.43.

The GOPPAR growth came against relatively high payroll levels at €191.01 per available room, equivalent to 33.5% of total revenue.

Profit & Loss Key Performance Indicators – Paris (EUR)

KPI June 2019 v. June 2018
RevPAR +19.5% to €417.23
TRevPAR +10.6% to €568.66
Payroll +2.1% to €191.01
GOPPAR +23.5% to €230.87

It was also a relatively positive month for hotels in Rome, which managed to limit the decline in profit per room to just 0.2% to €157.96, in spite of Italian authorities placing the city under high alert for dangerous temperatures as Europe was hit by a period of unusually hot weather.

The heat seemed to have little impact on visitors to the Italian capital, as RevPAR increased by 4.8% YOY to €277.57, which was a high for 2019.

However, falling ancillary revenues meant TRevPAR at hotels in Rome grew by just 1.6% this month to €394.54.

And rising costs, in particular a 3.2% increase in payroll, wiped out the growth in revenue, resulting in a second consecutive month of YOY profit decline in an otherwise positive year of trading so far in 2019.

Profit & Loss Key Performance Indicators – Rome (EUR)

KPI June 2019 v. June 2018
RevPAR +4.8% to €277.57
TRevPAR +1.6% to €394.54
Payroll +3.2% to €123.37
GOPPAR -0.2% to €157.96
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Author: Chief Assignment Editor

Chief Assignment Duty Editor based in Honolulu