Profits keep growing for Europe's hotels

Paris
Paris GOPPAR levels in December dropped 60.9 percent year-over-year. Photo credit: iStock / Getty Images Plus / PocholoCalapre

Last month, HotStats predicted that barring unexpected surprises in December's numbers, Europe’s hotels would record another huge profit increase in 2018, following an 8.9-percent increase in 2017.

As it turned out, hotels in Europe did see a 2.7-percent, year-over-year decline in profit per room in December—only the second month out of the year—but that drop wasn't enough to hurt the predicted profit growth. And according to HotStats' latest figures, annual total gross operating profit for the year rose 9.2 percent. 

December was especially hit by declines across non-rooms departments, including F&B (down 0.9 percent), conference and banqueting (down 3.7 percent) and leisure (down 4.5 percent), on a per-available-room basis.

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As a result of the movement in departmental revenues, TRevPAR growth was relatively muted at 0.3 percent to €144.49. This is, however, typical for the time of year, as demand from the corporate segment declines toward year's end, according to HotStats.

Data showed payroll levels as a percentage of total revenue fell by 0.2 percentage points to 38.5 percent; however, this was countered by an increase in overheads as a percentage of total revenue, which grew by 0.2 percentage points to 25.9 percent.

As expected, HotStats noted, profit conversion was a challenge in December and was recorded at 25 percent of total revenue, well below the annual contribution of 36 percent.

“Despite the slow period of trading in December, hotel owners and operators across Europe will be delighted to record a second consecutive year of strong profit growth in the face of a challenging operating climate,” said Michael Grove, HotStats' director of intelligence and customer solutions, EMEA, in a statement.

Further analysis by HotStats showed activity in specific markets, including:

Vienna

The strong performance across Europe this year was led by Vienna, which recorded a year-over-year GOPPAR increase of 24.2 percent in 2018, including year-over-year growth of 27.5 percent in December, a product of a 25.5-percent increase in RevPAR to €191.35, which was fueled by a 5.8-percentage-point increase in room occupancy and a 17.3-percent increase in achieved average room rate, which hit €217.28. This was a RevPAR high for the year, and almost €55 above the year-to-date figure

Profits were further boosted by cost-savings, which were led by a reduction in payroll as a percentage of total revenue, which fell 2.9 percentage points to 30.8 percent.

Paris

In contrast to Vienna, Paris GOPPAR levels in December dropped 60.9 percent year-over-year to €32.79, in part due to the disruption caused by four weekends of anti-government violence along the Champs-Elysées. [The protests cost Paris hoteliers an estimated €18 million ($20.43 million) in lost revenue as visitors canceled their bookings, research firm MKG reported at the time.]

December was the only month in 2018 in which hotels in the French capital suffered a year-over-year decline in profit, with the prior 11 months of consecutive growth contributing to the 28-percent, year-over-year increase in profit per room.

Profit levels fell as room occupancy dropped by 9.5 percentage points year-over-year to 54.5 percent, a low for the year.

The impact from the significant drop in demand was a decline across all revenue centers, which contributed to a 13-percent decrease in TRevPAR in December to €330.32.