According to the July profit and loss data from HotStats, the industry is still accruing negative months of profitability—except for the Asia-Pacific region—after two consecutive months of positive gross operating profit per available room. And while global performance data is still well off from the year before, the analytics firm notes some reason for celebration, with “monthly strides” in most key performance metrics.
Hotels in downtown urban markets—the ones that usually cater to business travelers and host events—are struggling, while properties in secondary and tertiary and resort markets (in other words, drive-to destinations) have found some preliminary success—a sign that even the biggest pandemic in more than a century can’t stop travel altogether.
“The global hotel industry is far from recovered, but the proverbial light at the end of tunnel is out there,” said David Eisen, director of hotel intelligence, Americas, HotStats. “Getting back to profitability will take a careful mix of revenue generation and expense control. In this current environment, we’ve seen, expectedly, both revenue and expenses come down. The hope is that on the way back up, revenue climbs and hoteliers continue to keep costs at bay, thereby ensuring quicker and more sustained profitability.”
Here's how each region is faring, according to HotStats:
July was an especially difficult month in the U.S., with 70,000 new cases on July 16 alone, according to the Centers for Disease Control and Prevention—the first time that threshold had been broken. In total, there were five days in the month where new cases exceeded 70,000. New cases have since ebbed: The seven-day moving average as of Aug. 23 was 42,909, also according to the CDC.
July’s hotel performance numbers were still better than June's. Total revenue per available room was up to $43.68, a 29 percent increase on June, but still down 82.4 percent year over year.
Both occupancy and rate continue to inch up higher month-to-month, leading to RevPAR of close to $30, a $7 gain over June and 230 percent higher than the lifeless $8.94 RevPAR in April.
GOPPAR, however, remained below zero at -$5.59, a 106.7 percent decline from the year prior, the result of a revenue shortage combined with a continued cost base that is smaller, but still existent. Total labor costs were down 72 percent year over year, and after an actual jump in June over May, settled back to around $25 per available room, which is where they’ve been since the impact of the pandemic began showing up in performance data in April.
Profit margin improved 46 percentage points over June to -12.8 percent, the best it’s been since March.
Asia-Pacific continues to be a beacon of hope amid a sea of negativity. For the second consecutive month, the region recorded positive GOPPAR, a feat unmatched by the rest of the world on aggregate. GOPPAR climbed to $11.82, a 225 percent improvement on June, when GOPPAR was $3.63—the first time the metric turned positive since COVID-19 tightened its grip in February.
Framed amid the pandemic, the scant amount of profit is cause for celebration, though reality is that GOPPAR in July is still 76.8 percent down versus the same month last year.
TRevPAR reached its highest mark since February, as room occupancy and average rate climbed, coupled with slight upticks in ancillary revenue, including a jump in food and beverage revenue, up 209 percent against April, when F&B RevPAR hit a low of $7.86.
Expenses continued their downward trend on a year-over-year basis. Total labor costs were down 44.6 percent year over year, while total overhead costs dropped 41.4 percent on a year over year basis. Profit margin for the month was up to 17.4 percent after falling into negative territory from March through May.
In China, where cinemas have been open since July 20, with reports of rising attendance, July was the third consecutive month of profit gains. GOPPAR, down 34.5 percent year over year, was up to $25, $10 more than June. Occupancy in the country climbed above 50 percent for the first time since December 2019, and with a slight uptick in rate, revenue per available room was at a higher level than it was in January. Total RevPAR made a big jump, up $15 over June and 655 percent higher than February, the height of COVID-19’s impact on the country.
Asia-Pacific’s thaw is a good sign for the rest of the world; that’s if strides are made against the pandemic, either a further rollback of cases or continued promise of therapeutics and a vaccine.
In Europe, it’s still touch and go, with countries, such as Spain, seeing a recent resurgence in cases.
Though profit remains stuck in negative territory, a break-even level is in sight at last. In July, TRevPAR saw its largest jump in three months, up to $36.91, 113 percent higher than June. The growth in total revenue came on the back of rising RevPAR, which dipped into double digits for the first time since March, bolstered by an average rate above $100 and a climb in occupancy.
Still, and despite continued expense degeneration, it was not enough to produce positive GOPPAR, which was recorded at -€3.26, down 104 percent against the same time last year, but 77 percent higher than June.
Total labor costs on a per-available-room basis were up more than €2 from June to July, a sign that more hotels are reopening and getting back to business after preceding closures.
At -8.8 percent, profit margin at Europe’s hotels was still negative in July, but it's good news: In June, profit margin stood at a disconcerting -83.1 percent.
The Middle East also saw improvements on a month-over-month basis. RevPAR climbed $8 higher than in June, bolstered by an almost $20 hike in rate to $123.72, which was only 9 percent lower than at the same time last year. Room-revenue generation underpinned month-over-month growth in TRevPAR, which also gained an almost $20 bump to $55.90, which is a 47 percent increase over June. Beyond rooms, F&B revenue saw a nice bump, up 67 percent on June.
Expense drops included a 31 percent year over year decrease in utilities and a 47 percent year over year decrease in total labor costs. Still, better revenue production coupled with expense cuts were not enough to produce positive GOPPAR, which was recorded at -$4.52 in July, a 113 percent year over year decrease, but an improvement of 74 percent on June.
Like other regions, profit margin in the Middle East was still negative, but climbed 38 percentage points to -8.2 percent.