According to HotStats' latest report on the European chain hotels market report, Hamburg, Madrid and Paris all achieved significant RevPAR growth in April.
But despite their strong revenue levels in certain departments, these urban markets still face a range of hurdles in other profit-gaining categories.
Cost Creep Wipes Out Revenue Growth for Hamburg Hotels
Despite recording a 1.3-percent increase in total revenue in April, hotels in Hamburg suffered a 5.2 percent decline in profit per room due to escalating costs, according to the latest data from HotStats. The growth in TrevPAR was primarily a result of a 2.9-percent increase in rooms revenue and was in spite of declines in non-rooms revenue, including food and beverage by 4.2 percent and conference and banqueting by 23.9 percent.
Although hoteliers in Hamburg recorded an increase in RevPAR, the growth in this measure was largely due to a 3.8-percent increase in occupancy, as achieved average room rate fell by 1.6 percent to $186—which meant hoteliers were working harder for less reward.
The decline in April is further to the positive start to the year, during which year-on-year growth in profit per room was recorded at +8.4 percent in Q1 2017 to $47.80. This was in spite of cost increases recorded in both payroll by 3.7 percent and overheads by 3.5 percent on a per available room basis. The biggest overall cost for hotels in Hamburg remains payroll, which this month increased by 0.4 percent to 27.6 percent of total revenue, compared to 27.1 percent during the same period in 2016.
RevPAR Growth Comes at a Cost for Hotels in Madrid
Although hotels in Madrid recorded a 15.4-percent increase in RevPAR in April, it was at the expense of a 12.8-percent increase in rooms departmental costs.
As a result of increases in both room occupancy by 5.9 percent and achieved average room rate by 7 percent, Madrid hoteliers recorded a $19.29-year-on-year increase in rooms revenue to $144.73. However, rooms profit growth was limited to just $14.34 due to increases in all rooms department costs, including rooms cost of sales by 27.6 percent, rooms expenses by 12.7 percent and rooms payroll by 8.2 percent on a per available room basis.
That said, steady top line growth has meant that rooms profit at hotels in Madrid has increased by 33.1 percent over the last 24 months to $81.52 in the 12 months leading up to April 2017. This is equivalent to a rooms profit conversion of 67.7 percent of rooms revenue.
Paris Profit Levels Start to Recover
Despite declining total revenue levels, Paris hotels recorded an 8.9 percent increase in profit per room in April, which contributed to the 22.1-percent increase for year-to-date 2017. Hotels in Paris have experienced very challenging operating conditions over the last 24 months following a series of security threats, which led to top and bottom line performance plummeting. Although year-on-year RevPAR growth in the French capital was recorded at 3.5 percent in April and TrevPAR fell by 2.8 percent, cost-cutting measures let hotels in Paris achieve an 8.9-percent increase in profit per room to $39.05.
Despite showing signs of recovery in the first few months of 2017, Paris still has some way to go before returning to previous performance levels. Within the 12 months before April 2017, profit per room remains 32.9 percent behind the same period in 2015/16. Furthermore, despite the growth in profit this month and the year-to-date increase, there is a clear sign of recovery. At $35.64 in the four months before April 2017, profit conversion at hotels in Paris remained low for the year-to-date at just 10.0 percent of total revenue.