Europe's hotel performance remains strong with February profit boost

Hotel NH Madrid Nacional, Spain. Photo credit: NH Hotel Group

European hotels maintained their strong performance results for the year so far, recording an 8.3-percent year-on-year increase in profit per room in February, according to the latest HotStats data. Growth was also recorded across all revenue departments thanks to high cost savings, pushing RevPAR to rise 4.3 percent to €89.87.

GOPPAR at these hotels surged to €31.30 this month for the 10th consecutive month of profit growth. The rising levels represented a positive trading period for properties in the region. They also drove profit per room levels up 8.3 percent to €59.17 in the 12 months to February 2018.

Increases across all revenue departments also contributed to the growth in profit per room this month. European hotels recorded a 3.2-percent year-on-year boost in TrevPAR to €141.52. A 4.3-percent increase in rooms revenue, a 1.7-percent increase in food and beverage revenue along with a 2.3-percent increase in conference and banqueting revenue on a per available room basis led to the increased TrevPAR levels. Achieved average room rate, which rose 3.4 percent to €143.11, drove rooms revenue increases at hotels in the region in February with the help of a 0.6-percent rise in room occupancy to 62.8 percent.   
 
The demand in Europe pushed growth in headline performance at the region's hotels. However, the commercial sector was the main driver of this increase with rises recorded in the residential conference segment at 6.4 percent and the corporate segment at 8.1 percent. Meanwhile, the individual leisure segment saw limited success, as the sector rose only 0.8 percent. 

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Cost savings, especially due to a 0.3-percent reduction in payroll to 41.7 percent of total revenue, also allowed revenue levels and efficiency rise. In response, hotels in Europe recorded a profit conversion of 22.1 percent of total revenue in February, which increased 1.0 percent from the same period last year. 

Madrid, Spain

Madrid's hotels scored a top performance increase of 24.1 percent YOY in profit per room to €38.79 for the region in February. The rises can be attributed to the rise in revenues and a reduction in costs. 

An 8.4-percent increase in RevPAR to €104.22 drove top line growth for February at the Spanish capital's hotels. The hotels also recorded a 1.1-percent increase in room occupancy to 69.2 percent along with a 6.7-percent increase in achieved average room rate to €150.70. Growth in the commercial sector, including a 33.9-percent rise in the corporate segment and an 18.2-percent rise in the conference segment, allowed these room rates to increase. 

Le Méridien Munich, Germany. Photo credit: Marriott

Hotels in Madrid also saw growth in non-rooms departments, including food and beverage at 7.0 percent and conference and banqueting at 9.4 percent. In response, the non-rooms growth drove TrevPAR for the month to increase 7.3 percent to €155.86. 

Hotels in Madrid also successfully cut costs, including payroll at 0.6 percent to 43.6 percent of total revenue while GOPPAR grew 24.1 percent to €38.79. This rise in GOPPAR pushed profit per room to rise 33.6 percent year-to-date. Means hotels in Madrid are already set to achieve another year of profit growth after consistent increases in 2016 at 3.3 percent and 2017 at 16.7 percent. “The growth in top and bottom line performance for hotels in Madrid over the last couple of years has been supported by the elevated tourism profile of the city, which has contributed to Spain attracting a record number of visitors in 2017, to approximately 82 million. This has been in spite of anti-tourism protests across the country. In addition, demand to hotels in Madrid in February was driven by the EAHAD medical congress, as the city remains a popular destination for business tourism,” Pablo Alonso, CEO of HotStats, said in a statement.

Munich, Germany  

In contrast, hotels in Munich suffered a 36.4-percent decline in profit per room this month. Performance levels dropped due to a reduction in demand from the conference sector. The Munich Security Conference, which attracted more than 680 participants in February 2017, made the largest impact on local hotels as conference participant numbers dropped in 2018. Local hotels still failed to achieve the same performance seen the year prior, despite accommodating several high-profile visitors and their entourage, including heads of state, government leaders, representatives of international organizations and top business leaders. With the reduced demand from the conference sector, Munich's hotels suffered an 18.8-percent decline in RevPAR. The 13.0-percent YOY drop in room occupancy to 64.7 percent as well as a 2.6-percent decline in achieved average room rate to €148.85 are mainly to blame. 

A decrease in non-rooms revenues at hotels in Munich in February, which was seen in the 10.1-percent YOY drop in food and beverage revenue on a per available room basis, contributed to a 16.4-percent decrease in TrevPAR to €138.70. 

Hotels in Munich recorded cost increases in overheads, which rose 4.4 percent YOY to 27.6 percent of the total revenue, and payroll, which rose 4.6 percent to 39.1 percent. As a result, GOPPAR fell 36.4 percent to €36.49 while total RevPAR fell 18.8 percent to €96.36.  This represented a profit conversion of 26.3 percent of the total revenue. The profit declines drove the year-to-date profit to drop 28.1 percent at Munich's hotels.