September still hot for Europe's hotels

Virginia-based lodging REIT Park Hotels & Resorts has sold the 601-room Hilton Berlin in Germany for $350 million
Hilton Berlin, Germany. Photo credit: Hilton

Hotel performance in Europe remained hot in September, with key performance indicators showing continued resilience. 

According to the latest data from HotStats, profit per room increased 3.7 percent year-over-year to €96.80, second only to the peak recorded at hotels across the region in June at €105.07, and was almost 44 percent above the figure for year-to-date 2018 at €67.34.

Profit Performance

The YOY increase in profit per room was driven by growth across all revenue centers, including rooms (up 3.3 percent), food and beverage (up 0.6 percent) and conference and banqueting (up 1.6 percent), on a per-available-room basis, which contributed to the 2.5-percent uplift in TRevPAR to €220.98.

FREE DAILY NEWSLETTER

Like this story? Subscribe to IHIF!

The hospitality industry turns to IHIF International Hotel Investment News as the must-read source for investment and development coverage worldwide. Sign up today to get inside the deal with the latest transactions, openings, financing, and more delivered to your inbox and read on the go.

September also marked a return to more robust levels of non-rooms revenue performance, illustrated by the contribution from the food and beverage department, which was recorded at €60.46 per available room that month, compared to just €44.05 last month. 

The positive performance that month was slightly marred by a 0.1-percentage-point increase in payroll costs, which grew to 28.2 percent of total revenue.

However, GOPPAR growth continues unabated at hotels in Europe and has now increased by 10.4 percent in the nine months to September, against the same period in 2017, with profit conversion recorded at a strong 43.8 percent of total revenue. 

“Profit performance at hotels in Europe typically peaks in the months of June and September, which is when there is an overlap in the major commercial and leisure demand segments, which supercharge performance for hotels across the region,” said Michael Grove, director of intelligence and customer solutions, EMEA, at HotStats. “Hoteliers in Europe will now be keen to maintain profit performance into Q4 2018 and record yet another year of bumper GOPPAR growth.”

Top-line growth for hotels in Europe in September was led by a 4.2-percent increase in achieved average room rate, which grew to €185.43 and offset the 0.7-percentage-point decline in room occupancy to 82.1 percent. Year-over-year, Europe’s RevPAR increased 3.3 percent to €152.31. 

Athens

One of the top-performing markets in Europe in September was Athens, where profit per room increased by 8.2 percent year-over-year to €136.46. 

The uplift in GOPPAR was led by growth in the rooms department, which increased 6.1 percent YOY to €203.79 and was fuelled by a 10.6-percent increase in achieved average room rate to €229.33. This offset the 3.7-percentage-point decline in room occupancy to 88.9 percent, although this was a high for 2018.  

Top-line growth was primarily driven by the commercial segment, as the Greek capital continues to recover its position in the European business market, and included YOY increases in achieved rate in both the corporate (up 6.2 percent) and residential conference (up 4.2 percent) segments. 

As a result of growth across all departments, TRevPAR at hotels in the city increased by 5.3 percent in September to €295.21. 

The growth in revenue was supported by cost savings, which included a 0.6-percentage-point reduction in payroll to 36.6 percent. As a result of the punchy top-line performance and reduction in costs, profit conversion at hotels in Athens was recorded at 46.2 percent of total revenue. 

“Hoteliers in Athens have undoubtedly been through a rough time over the last decade due to the challenges in the Greek economy and only exited their most recent recessionary period in mid-2017,” said Grove. “However, the rate recorded in the corporate segment has increased by more than €30 over the last 18 months, suggesting that the market is back on an upward trend.” 

Berlin

Properties in Berlin also performed well in September, recording an 18.4-percent increase in profit per room to hit €107.89. 

This was the highest GOPPAR recorded at hotels in the German capital in 2018 and was 106 percent above the year-to-date figure at €52.44. The growth in profit was fueled by a 14-percent increase in RevPAR, which also hit a high for the year at €171.01. This was primarily due to a 10.8-percent increase in achieved average room rate to €195.37, as well as a 2.5-percentage-point increase in room occupancy to 87.5 percent.

Falling costs, which included a 1.2-percentage-point decrease in payroll to 24.3 percent of total revenue, added to the positive story for the city’s hotels this month, and resulted in profit conversion of 44.8 percent of total revenue. 

Suggested Articles

In 2020, Hotel Management is spotlighting hotel operators from all corners of the U.S. This installment focuses on companies based in the South.

Driftwood Capital plans to open the 198-room Canopy by Hilton Tempe (Ariz.) Downtown early this spring.

Tye Turman, who is leaving Marriott International after more than 30 years, will take the reins of the San Antonio-based company March 1.