Profitability vacates European hotel sector, in 116% decline

The profitability of hotel rooms in Europe during March declined by a record 115.9%, according to new data from HotStats, marking the biggest year-on-year decline since April 2009 and the height of the global financial crisis (GFC).

Revenue per average room (revPAR) was down 66.2% year-on-year, the result of a 44.6 percentage point (p.p.) drop in occupancy, combined with an 11% year-on-year drop in average rate. As all ancillary revenue plummeted, it brought trevPAR down 61.6%, again the largest year-on-year drop in the KPI since April 2009, when TRevPAR declined 23.5%.

The data shows that Covid-19 is hitting revenue and profit around 3x harder than the GFC and some 4x harder than 9/11.

Sinking revenue was accompanied by double-digit expense drops, the product of hotel closures, scaled-back operations and lighter staffing. Labour costs were down 28.8% year-on-year on a per-available-room basis.

Total overhead costs were down 25.3% year-on-year.

Profit margin was down 45.7% to -13.1%, the first time HotStats has recorded a negative profit margin for the region.

Reflecting global situation
The European position reflects the global situation, with the gross operating profitability per available room (GOPPAR) down by around 100% in all regions.

March 2020 marked the first time in the HotStats database that the US recorded a negative GOPPAR value, plummeting by 110.6%.

The same figure in Asia Pacific fell 117.8% in March, although Chinese figures recovered slightly during the month, as occupancy there inched up 7.3% over February.

In Hubei province, where the coronavirus was first detected, occupancy in March was already up to 58.9%, only an 11 p.p. decrease from the same time a year ago. Though much of that occupancy is likely a function of medical workers using the hotels for accommodation, GOPPAR was positive for the month at $22.60, after a negative month of February.

The Middle East, too, was not spared in March. GOPPAR was down 98.4% year-on-year, a record for the region and highest since it was down 74.3% year-on-year in July 2013, a time of civil unrest that included the Egyptian coup.


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