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Profit slide continues for Middle East & North Africa hotels

Profit slide continues for Middle East & North Africa hotels

eTurboNews -

Waning revenues and rising costs have conspired to hobble profit per room at hotels in the Middle East & North Africa, as GOPPAR in the region has slid by almost 40 percent over the last 36 months, according to the latest data tracking full-service hotels from HotStats.

Bucking the month-to-month downward trend, however, GOPPAR in October, at $77.16, was 104 percent higher than the previous month, but still an 8.1-percent year-over-year decline. Hotels in the region have now recorded a YOY decline in profit in seven of the last 10 months.

The decline this month was led by a 3.8-percent drop in RevPAR, the byproduct of a 5.2-percent decline in average room rate. Further declines were recorded across non-rooms departments, including food & beverage, down 3.7 percent on a per-available-room basis. TRevPAR for the month declined 4 percent to $205.09.

Profit & Loss Key Performance Indicators – Middle East & North Africa (in USD)

October 2018 v. October 2017

RevPAR: -3.8% to $120.25
TRevPAR: -4.0% to $205.09
Payroll: +0.9 pts. to 26.7%
GOPPAR: -8.1% to $77.16

The drop in revenue was further exacerbated by rising costs, which included a 0.9-percentage-point increase in payroll to 26.7 percent of total revenue, as well as a 0.9-percentage-point increase in overheads, which grew to 26.3 percent of total revenue.

As a result of the movement in revenue and costs, profit conversion at hotels was recorded at 37.6 percent of total revenue in October.

“As the market returned to a more commercial-led mix, hotels in the Middle East & North Africa would have expected some positive news following a pretty torrid period of trading during the summer; however, this did not transpire,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats.

In contrast to the wider Middle East & North Africa market, hotels in Egypt performed well, led by Cairo, where hotels recorded a 24.1-percent YOY increase in profit per room to $54.95 for the month. This represented the seventh month of the year in which hotels in the city recorded a YOY increase in GOPPAR.

In addition to a 22-percent increase in rooms revenue, the significant uplift in volume helped hotels in Cairo record strong growth in non-rooms departments, including food & beverage (up 25.2 percent) and conference & banqueting (up 23.2 percent), on a per-available-room basis.

As a result of the movement across all revenue centers, TRevPAR increased by 21.1 percent YOY to $106.36. This was further buoyed by a YOY drop in payroll, which fell by 1.5 percentage points to 15.8 percent of total revenue.
Profit conversion at hotels in Cairo soared to a lofty 51.7 percent of total revenue.

“Egypt is currently bucking the negative trend faced by hoteliers across much of the rest of the Middle East & North Africa, which is being led by robust economic growth forecast at 5 percent for 2018, with greater increases anticipated in 2019 and 2020,” said Grove. “After challenges in 2011, reform momentum is being sustained and the positive economic news will be welcomed by owners and operators.”

Profit & Loss Key Performance Indicators – Cairo (in USD)

October 2018 v. October 2017

RevPAR: +22.0% to $64.71
TRevPAR: +21.1% to $106.36
Payroll: -1.5 pts. to 15.8%
GOPPAR: +24.2% to $54.95

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