Festivals helped drive European hotel profits in October

 Le Meridien Munich, Germany
Le Meridien Munich, Germany. Photo credit: Marriott International

October was a good month for Europe's hotels, which saw a 6.1-percent, year-over-year increase in profit per room, with many benefiting from area festivals and events, according to the latest data tracking full-service hotels from HotStats.

While GOPPAR levels actually dipped against September—dropping to €79.57 for the month, against €96.80 last month—the considerable year-over-year growth in October was sufficient to continue driving a strong year-to-date increase in profit per room, which is now 9.8 percent above the same period in 2017. 

Rising Revenues

Growth in profit this month was aided by a 6.1-percent increase in RevPAR, fueled significantly by a 5.2-percent increase in achieved average room rate to €171.79.

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In addition to year-over-year growth in rooms revenue, hotels in Europe recorded a revenue increase across non-rooms departments, including F&B (up 0.6 percent) on a per-available-room basis, which contributed to the 3.6 percent uplift in TRevPAR this month to €197.42.

Top-line performance was led by demand from the commercial sector, which accounted for almost 40 percent of all roomnights.

While there was a decline in the achieved rate in the individual leisure segment in the month (down 2.4 percent), this was cushioned by year-over-year growth in rate in the residential conference (up 6.8 percent), corporate (up 0.6 percent) and group leisure (up 10.8 percent) segments. 

The growth in revenue in October was complemented by cost savings, which included a 0.6-percentage-point reduction in payroll to 29.7 percent of total revenue—despite a 0.1-percentage-point increase in overhead to 20.2 percent of total revenue, according to the data. 

As a result of the movement in revenue and costs, profit conversion at hotels in Europe was recorded at 40.3 percent of total revenue in October. 

“Profit performance for hotels in Europe is proving to be very consistent, with just two months of year-over-year GOPPAR decline recorded since October 2016,” said Michael Grove, director of intelligence and customer solutions, EMEA, at HotStats. “This is despite slowing economic growth across the Eurozone.”

Festival Support

Strong performance across the region was led by contribution from a number of key city markets that hosted major festivals and conferences. 

The greatest margin of year-over-year performance growth was recorded in Munich, Germany, home to Oktoberfest. The 16- to 18-day festival annually attracts more than six million people, significantly driving up demand for hotel accommodations in the city. This year was no different, with hotels in Munich recording a 52.4-percent, year-over-year increase in profit per room for the month to €132.38, which is a high for 2018, and was 85.9 percent above the year-to-date GOPPAR of €71.22. 

The growth in profit was led by an increase across all departments, which included a 33.5-percent increase in RevPAR to €188.30, as room occupancy grew by 5.2 percentage points to 82.2 percent, and achieved average room rate soared by 25 percent to €229.11.

According to the HotStats' data, the significant increase in revenue enabled huge cost savings to be made, which included a 6.1-percentage-point reduction in payroll to 21.1 percent of total revenue.

Beyond Oktoberfest, the city was supported by a range of major international conferences hosted at the ICM–Internationales Congress Center München, including the 2018 ESMO oncology conference, which attracted more than 24,000 attendees.

As a result of the robust top-line performance and reduction in costs, profit conversion at hotels in Munich was recorded at 53.2 percent of total revenue.

Outside Munich, hotels in Budapest, Hungary, also performed well in October, due in large part to the Hungarian capital hosting the citywide CAFe Budapest Contemporary Arts Festival, which helped drive a 15.6-percent increase in RevPAR to €123.26.   

The growth in rooms revenue in the city was supported by increases in non-rooms revenues, including F&B (up 14.5 percent) and conference and banqueting (up 12.7 percent), which contributed to the 12.2-percent, year-over-year increase in TRevPAR to €171.31.  
Falling costs, which included a 0.5-percentage-point decrease in payroll to 22.1 percent of total revenue, added to the positive story for hotels in Budapest and equated into profit conversion of 47.7 percent of total revenue. 

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