After strong 2018, Europe's hotels rode bumpy January

Lisbon Portugal
Hotels in Lisbon recorded a 6.4-percent decrease in profit per room. Photo credit: Rrrainbow/iStock/Getty Images Plus/Getty Images

Historically, January is a slow month for hotels in Europe, and January 2019 was no exception. According to the latest data from HotStats tracking full-service hotels, profit per room at hotels in mainland Europe fell by 9.1 percent year-over-year over the month—the largest margin of decline in this measure since August 2016—as revenues dropped and costs escalated.

Still, analysts noted, the dip should not “portend gloom” for the full-year even though 2018 was a “very successful” year for hotels in mainland Europe, with an 8.8-percent increase in gross operating profit per available room (GOPPAR).

The decline in January was led by a 1.3-percent drop in non-rooms revenues, which fell to €47.10, equivalent to 36.7 percent of total revenue. The falling ancillary revenues included declines in food and beverage (down 1.5 percent) and conference and banqueting (down 0.8 percent), on a per-available-room basis.

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RevPAR was down 0.2 percent to €81.19, in spite of a 1.5-percent increase in achieved average room rate to €141.04. Occupancy fell by 0.9 percentage points.

Declines across revenue centers contributed to the 0.6-percent year-over-year decline in total RevPAR (TRevPAR), which fell to €128.29. Falling TRevPAR levels were further hit by rising costs, including a 1.3-percentage-point increase in payroll levels as a percentage of total revenue to 42.3 percent, as well as a 1.4-percentage-point increase in overheads as a percentage of total revenue to 29 percent.

As a result of the movement in revenue and costs, profit contribution at hotels in Europe was recorded at 20.8 percent of total revenue, which is significantly below the average for the rolling 12 months to January 2019, at 36.2 percent.

“While blame can undoubtedly be attributed to the time of year and we can’t be too quick to pass judgment on the outlook for 2019, volume levels in the region appear to be stabilizing, and even falling back, which will hit ancillary revenues, forcing hoteliers to work harder to generate a profit,” said Michael Grove, director of hotel intelligence and customer solutions, EMEA, at HotStats.


One of the markets to suffer the greatest decline in January was Lisbon, which recorded a 6.4-percent decrease in profit per room, which was the fifth month of year-over-year GOPPAR decline in the Portuguese capital since the market started to cool last July.

Prior to then, profit per room had soared by more than €20 in the preceding 24 months to hit €53.55 in the rolling 12 months to July; however, a slowing in top-line performance, particularly in room occupancy, has been to the detriment of the bottom line, according to HotStats.

This month, despite a 5.2-percentage-point year-over-year decline in room occupancy to 51.7 percent, RevPAR in Lisbon increased by 2.2 percent, thanks to a robust 12.5-percent year-over-year increase in ARR to €121.08, the data indicated.

Despite mixed departmental revenue performance, Lisbon hotels recorded a 1.8-percent year-over-year increase in TRevPAR, which grew to €99.61 in the month, but was almost €33 behind the TRevPAR recorded in the rolling 12 months to January, at €132.51.

However, growth was impaired by rising costs, which were led by a 1.6-percentage-point increase in payroll as a percentage of total revenue to 42.7 percent.

Profit margin was recorded at just 22.8 percent in January.


While a similar profit contribution was recorded at properties in Madrid in January, it was a very different story for hotels in the Spanish capital, where year-over-year GOPPAR soared by 31 percent in the month, HotStats noted.

The growth in profit was led by a 9.1-percent increase in ADR, which hit €151.61 and was a fourth consecutive month of significant growth in rate, helping fuel a 9.4-percent increase in RevPAR for the month to €91.03.

Growth in non-rooms revenues contributed to an 11.3-percent increase in TRevPAR to €142.26.

And thanks to a 3.7-percentage-point decline in payroll levels as a percentage of total revenue, hotels in Madrid recorded a year-over-year increase in profit per room to €32.18.