HotStats: U.S. hotels finally reach profitability in October

At $5.43, gross operating profit per available room in the U.S. still was down 95.5 percent compared to the same time last year. Photo credit: Getty/NicoElNino (A bar chart showing positive business growth)

In October, the U.S. finally “shed the ignominy” of being the only global region to have not recorded a positive month of profitability since the start of the COVID-19 pandemic, as the latest report from HotStats phrased it. 

The country reached gross operating profit per available room above $0, but at $5.43, it was still down 95.5 percent compared to the same time last year. Still, the report noted that the positive numbers could be undone by the spike in COVID-19 cases and subsequent efforts to contain it—efforts the report calls “typically anti-movement and anti-business.” 

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While October was better for U.S. hotels, it was less so for Europe, which fell to -€5.06 after two consecutive positive months. The Middle East and Asia-Pacific remained above water. Highlights from the report include:

U.S. 

The slight-but-steady rise in occupancy and rate helped revenue per available room reach $40.99 in October. This number was a 78 percent decrease from a year ago—but was a 7.3 percent improvement over September and a 365 percent increase over April, when RevPAR was at its lowest point at $8.99.

Total revenue per available room continued its advancing trend, but the growth has been muted by an overall dearth of ancillary spend that has hampered the ability of hoteliers to realize better gains than normal. However, in this operating environment, hoteliers understand that normal doesn’t currently exist. TRevPAR hit $60.89 in the month, $5 higher than the month previous, but down 79.3 percent year over year.

As local authorities reinstate measures to curb the spread, restaurants could take a hit as the number of permitted customers remain low and outdoor dining less feasible, according to the report. F&B RevPAR hit double digits for the first time since March, but is still down 87.9 percent year over year.

Expenses remained muted in the month, the result of a decelerated operating model and labor structure, which could carry forward even as the hotel industry ramps further back up. Total labor costs retrenched in October over September, down 23 percent, potentially the result of the end of the summer season. Total labor costs as a percentage of revenue dropped nearly 20 percentage points over September to 47.8 percent, as revenue grew and labor cost decreased.

Profit margin for the month checked in at a minute 8.9 percent, which was still the first positive measure of the metric since February.

Europe 

Europe, meanwhile, saw regression across the board. A more than 5-percentage-point drop in occupancy in October over the month previous, coupled with a €4 reduction in rate, led to a 20.7 percent decrease in RevPAR—an expected decrease for the season, but especially difficult given the overall downturn. 

The drop in RevPAR resulted in a similar drop in TRevPAR, which decreased 18.5 percent over September and was down 76.7 percent year over year.

Like the U.S., expenses remained suppressed. Total labor costs were down 52.6 percent year over year, while total overheads were down 45.6 percent year over year. Still, the drop in expenses was not enough to overcome the fall in revenue, leading to negative GOPPAR of -€5.06 in the month after two consecutive months of positive GOPPAR.

Profit margin for the month was recorded at -11.1 percent.

Asia Pacific

The Asia Pacific region was the bright spot for the industry, with monthly occupancy reaching above 50 percent for the first time. This boost was led by China, where occupancy has eclipsed the 60 percent threshold for the past three months.

After a “hiccup” in September when RevPAR dropped lower than August, it was back up in October to $53, a 17 percent increase over the month prior. TRevPAR hit $101.50 in the month, a sign that ancillary revenue is making its rebound in tandem with room sales. In September, while RevPAR was lower than August, TRevPAR was higher, and the trend continued in October.

GOPPAR reached $27, $9 higher than the previous month, but down 54.8 percent year over year.

In China, GOPPAR hit $43.25, which was only 12 percent off from the same time a year ago, illustrating the country’s solid profit comeback from the depths of the pandemic. Profit was bolstered by a similar return to previous-year revenue levels that saw TRevPAR hit $119.62, just 8.7 percent below the same time last year.

On the expense side in China, costs continue to rise, perhaps a sign also of the overall recovery. Labor costs per available room hit $32.94, 10.7 percent less than the same time last year, while total overheads were recorded at $26.56, a 13.7 percent decrease over the same time a year ago.

Middle East 

After a string of difficult months, the Middle East is making its own steady ascent, with RevPAR climbing close to $50, a 19.8 percent rise over the month prior, but still 58 percent down year over year.

TRevPAR hit $88.54 led by an uptick in revenue from F&B, which hit $31.12, a $6 increase over the month previous.

The confluence of revenue and enervated expense led to a nice jump in profit for the region. GOPPAR was recorded at $14.11, which, though down 82 percent year over year, was 595 percent higher than September and accounted for the third consecutive month of positive profit.