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Profit growth accelerates at hotels in Europe

Profit growth accelerates at hotels in Europe

Following a period of lacklustre growth in Q1 2018, hotels in Europe recorded an impressive 18.9% increase in profit per room in April as a result of soaring revenues and falling costs, according to the latest worldwide poll of full-service hotels from HotStats.

Hotels in Europe recorded an 8.5% increase in TrevPAR this month, to €178.41, which was on the back of growth in Rooms revenue (+7.7%), as well as increases in Non-Rooms Departments, including Food & Beverage (+10.7%) and Conference & Banqueting (+22.9%) revenue, on a per available room basis.

The growth in Rooms revenue was led by a 5.4% increase in achieved average room rate, to €159.92, and supported by a 1.6-percentage point increase in room occupancy, to 73.7%, as the upward trajectory in RevPAR levels continued.

The growth in achieved average room rate this month was led by robust increases in rate in the commercial sector, including the Residential Conference (+9.1%) and Corporate (+11.1%) segments.

And despite a 4.2% year-on-year drop in rate in the Individual Leisure segment, a 9.5% increase was recorded in the Group Leisure Segment, which grew to €111.37 for the month.

The growth in RevPAR in April contributed to the 5.8% increase in this measure in the rolling 12 months to April 2018, at €115.27.

The Food & Beverage department recorded one of the most significant year-on-year increases in profit per room in April, which grew by 29.7% on a per available room basis, to €13.13.

In addition to the increase in Food (+9.0%) and Beverage (+7.9%) revenue on a per available room basis, hotels recorded savings in departmental costs, which included a drop in Food & Beverage Cost of Sales (-0.5 percentage points) and Food & Beverage Payroll (-2.9-percentage points).

As a result of the movement in revenue and costs, profit conversion in the Food & Beverage department increased by 3.6-percentage points, to 24.7% of departmental revenue.

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

April 2018 v April 2017
RevPAR: +7.7% to €117.79
TrevPAR: +8.5% to €178.41
Payroll: -1.8 pts to 33.3%
GOPPAR: +18.9% to €62.84

In addition to the growth in revenue across all departments, cost savings included a 1.8-percentage point decrease in Payroll, to 33.3% of total revenue, as well as a 1.4 percentage point drop in Overheads, to 21.8% of total revenue.

As a result, hotels in Europe recorded a twelfth consecutive month of profit growth in April, which climbed by 18.9% year-on-year to €62.84 per available room. This was equivalent to a profit conversion of 35.2% of total revenue.

This month was marked by strong performances from a number of major cities, which included Budapest, where hotels recorded a 15.8% year-on-year increase in profit per room in April, which was on the back of growth across all revenue centers.

Whilst volume levels at hotels in Budapest are declining, this is being more than offset by the growth in achieved average room rate as the city’s hoteliers find themselves in the luxurious position of being able to leverage price to a new high due to elevated demand levels and the current undersupply of hotel accommodation.

This was exemplified by the performance in the Hungarian capital in April, where a 2.4-percenatage point drop in room occupancy, which remained robust at 81.5%, was offset by the 8.3% year-on-year increase in achieved average room rate, to €129.34.

The rate growth this month contributed to the increase in this measure of almost €35 over the last three years, to €126.19 in the rolling 12 months to April 2018, from €91.38 during the same period in 2014/15.

The growth in Rooms Revenue is being supported by increases in Non-Rooms Departments, which helped to drive a year-on-year TrevPAR increase of 9.8%, to €151.22.

In addition to the growth in revenue, hotels in Budapest have been able to maintain an efficient cost base, with Payroll levels remaining at a lowly 24.8% of total revenue this month.

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

April 2018 v April 2017
RevPAR: +5.2% to €105.40
TrevPAR: +9.6% to €151.22
Payroll: +0.0 pts to 24.8%
GOPPAR: +15.8% to €66.66

As a result of the movement in revenue and costs, profit levels at hotels in Budapest accelerated to €66.66 per available room in April, equivalent to a profit conversion of 44% of total revenue, which is well above Europe overall and one of the most efficient markets in the region.

“The unrelenting increase in the number of tourists to Hungary, the majority of which will visit Budapest, continued in 2017 and was led by a 7.9% increase in the number of international visitors, which is enabling hoteliers to drive top and bottom line performance.

However, with approximately 1,000 bedrooms, mooted for development in the Hungarian capital in the next few years, many of which will be developed out by major international brands, it will be interesting to see if growth levels can be maintained,” said Pablo Alonso, CEO of HotStats.

Huge increases in top and bottom line performance at hotels in Brussels also contributed to the growth across the region this month.

The Belgian capital and seat of the European government has recorded profit growth of more than €15 since hitting a low of just €22.30 in the 12 months to October 2016 in the wake of the terrorist attacks, which took place just over two years ago.

The recovery in profit levels at hotels in Brussels hit a high of €37.98 in the rolling 12 months to April 2018 and was punctuated by the 65.9% year-on-year GOPPAR increase this month, to €56.24.

The 18.1% increase in RevPAR this month was primarily driven by a +7.7-percentage points increase in room occupancy, to 76.8, in addition to a +6.2% increase in achieved average room rate, to €161.73, which was the highest rate recorded in the city in recent years.

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

April 2018 v April 2017
RevPAR: +18.1% to €124.27
TrevPAR: +17.1% to €165.69
Payroll: -8.0 pts to 38.0%
GOPPAR: +65.9% to €56.24

Profit growth at hotels in Brussels was also helped by an 8.0-percentage point drop in Payroll levels, although they remained high at 38.0% of total revenue.

Read the full article: https://www.eturbonews.com/188213/profit-growth-accelerates-at-hotels-in-europe

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