U.S. hotel profits per room up despite rising costs

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Hotels in the U.S. posted a 1.8-percent year-over-year increase in profit per room in Q1 2018. This marks the third consecutive year of gross operating profit per available room growth for the period, according to the latest poll of full-service hotels in the U.S. from HotStats.

The growth in profit was driven by a 2.2-percent increase in total revenue per available room as hotels delivered record revenue increases across all departments.

The industry’s global RevPAR growth in Q1 2018 over 2017 contributed to the compound-annual-growth-rate increase of 5 percent per annum over the past four years, to $259.68 in Q1 2018, an uplift of almost $20 from Q1 2015.

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Despite these gains, hotels in the U.S. continue to find themselves wrestling with rising costs. The key cost increase has been labor, which has grown to 35.8 percent of total revenue in Q1 2018 from 33.4 percent in Q1 2015.

Photo credit: HotStats

Even though gross operating profit per available room reflects a compound annual growth rate of 2.9 percent per annum over the past four years, the froth may be coming off profit conversion. Gross operating profit as a proportion of total revenue fell to 37.2 percent in Q1 2018, from 37.3 percent in Q1 2017. Moreover, flow-through fell from 51 percent in Q1 2017 to 31 percent in Q1 2018.

The hotels profiled in this report are drawn from the HotStats database and reflect the portfolios and distribution of the hotel chains surveyed and which operate in the full-service sector. The data samples are reviewed and rebased each year to reflect the changes in the HotStats survey base. As a result, performance ratios published last year may differ from those contained within this report.