A decrease in non-rooms revenues along with rising costs drove GOPPAR at hotels in the Middle East and Africa to decrease 2.3 percent in June, despite the 1.4-percent increase in RevPAR to $93.14, according to the latest data from HotStats.
Hotels in the Middle East and Africa suffered from the challenges created by the decline in the oil and gas industry this month, the data indicated. Meanwhile, profit levels dropped to their lowest level in 2018 at $44.89—more than $40 below the year-to-date GOPPAR level of $76.41.
Falling revenues across non-rooms departments, including food and beverage at 3.5 percent and conference and banqueting at 7.3 percent, overshadowed the increase in RevPAR in the region. Total revenue at hotels in the Middle East and Africa fell 0.5 percent in June to $163.68, in response. This marked the lowest TrevPAR recorded in the region since July 2017 at almost $40 below the year-to-date figure of $201.04.
According to the data, hotels in the Middle East and Africa cut costs due to the continued decline in revenues. These properties recorded a 0.4-percent saving in payroll, which dropped to 33.3 percent of total revenue. A 1.3-percent increase in overheads canceled out this positive increase as growth was recorded in key expenses, including administration, general, marketing and property maintenance. Profit per room in the region fell for the third consecutive month. The profit conversion reached 27.4 percent of total revenue below the 38 percent year-to-date in 2018.
Achieved average room rate in the region also decreased 11 percent year-on-year, dropping more than $20 to $174.90 from $196.54 during the same period in 2017. This decline managed to avoid negatively impacting RevPAR.
However, room occupancy maintained a low 53.3 percent in the region, despite increasing 6.6 percent. Average room occupancy reached the lowest level recorded in 2018 and 13.4-percent below the year-to-date average at 66.7 percent.
“The challenging performance is unsurprising at this time of year due to Ramadan, a general reduction in visitor numbers to the region due to the stifling heat and slowing in commercial activity. However, the ongoing decline in achieved average room rate will be of serious concern to hotel owners and operators as it has been broadly following this negative trajectory for almost three years and is having a serious impact across the entire hotel profit and loss account,” said Pablo Alonso, CEO of HotStats.
Abu Dhabi, UAE
Performance at hotels in Abu Dhabi was in line with the rest of the region. These hotels saw a 0.6-percent drop in TrevPAR in June as declines in non-rooms revenues canceled out gains in rooms revenue. However, cost savings drove an increase in profit per room as GOPPAR fell to $5.19 for the month. Abu Dhabi's declines across non-rooms departments, which included food and beverage at 5.2 percent and leisure at 22.7 percent, drove TrevPAR to fall to $110.45.
Abu Dhabi’s hotels recorded a 3.5-percent increase in RevPAR in June 2018, despite a 2.7-percent drop in achieved average room rate to $97.49. Room occupancy also grew 3.2-percent YOY to 53.8 percent. RevPAR was one of the lowest recorded in the city in recent years at $52.45 and second only to June 2017 when it reached $50.68. However, cost savings, which included a 1-percent drop in payroll to 48.8 percent of total revenue, were enough for Abu Dhabi hotels to record the GOPPAR increase.
An average increase across all metrics, including rooms revenue at 5.9 percent and non-rooms revenue, led GOPPAR at Dubai hotels to rise. The increase in non-rooms revenue also contributed to the 2.4-percent YOY increase in TrevPAR to $172.91. Meanwhile, RevPAR for the region increased 6 percent to $83.13. The 2.2-percent saving in payroll to 43.5 percent of total revenue helped keep profit growing in June along with the rising revenues.
“[While] the triple-digit profit growth for Dubai hoteliers this month looks extremely positive, the movement as a quantum was very slight. Furthermore, it has unfortunately done very little to improve the overall profit picture in the UAE city for the year so far as GOPPAR levels for H1 2018 remain almost 9 percent below the same period in 2017,” Alonso said.