October's plunge in MENA hotel performance threatens profit growth

Manama, Bahrain (Bahrain adds 15 new hotel development projects to its pipeline.)

Although hotels in the Middle East and Northern Africa achieved a 1.9-percent year-on-year rise in GOPPAR, October marked another month of sharp declines in the region, according to a worldwide poll from HotStats. MENA hotels saw a 3.1-percent drop in achieved average room rate to $178.09. However, a 4.8-percent rise in room occupancy to 68.5 percent offset the low ARR levels, driving RevPAR up by 4.1 percent to $121.96.

In terms of non-rooms revenue, hotels in the Middle East & Africa recorded strong growth. Food and beverage rose by 1.4 percent as conference and banqueting increased by 1.2 percent. In turn, these revenue levels contributed to the increase in TrevPAR by 2.7 percent to $208.13. However, the Middle East and Africa's economy still faces challenges within the economy, particularly in the oil exporting countries. The region's achieved ARR has declined by more than $22 over the last 36 months in response to these challenges. Meanwhile, revenue from other departments dropped by about 16 percent during the same period to $86.17 in the 12 months to October 2017.

Despite a 0.4-percent rise in payroll to 25.9 percent of total revenue, the region's hotels achieved a 1.9-percent increase in GOPPAR to $81.42 with a profit conversion of 39.1 percent of total revenue. This month's increased year-to-date GOPPAR levels at hotels in the region remain 5.9 percent below the totals in the same period in 2016 at $70.51. Profit per room also saw significant drops to $74.77 in the 12 months to October 2017 and by almost 30 percent in the last 36 months. “The rollercoaster performance of hotels in the Middle East & Africa continued in October.  Although hotels in the region have successfully recorded six months of year-on-year profit per room growth in 2017, the remaining five months have seen GOPPAR levels declining at a more rapid rate. As a result, it is hard to see hotels in the region recording a positive outcome for the year,” Pablo Alonso, CEO of HotStats, said in a statement.


Thanks to a growing economy, hotels in Beirut have steered clear of the rest of the region's problems. These hotels have recorded a 20.7-percent year-on-year increase in RevPAR. The city's RevPAR gains can be attributed to the 8.6-percent growth in room occupancy to 69.5 percent and the a 5.7-percent increase in achieved average room rate to $116.00. Beirut's 28.7-percent YOY increase in rate in the leisure segment to $146.18 in October not only contributed to the achieved rate at hotels in Beirut, but also to the year-to-date increase of 9.9 percent to $136.59. This achieved rate in leisure reached higher levels than those in the corporate at $89.28 and residential conference at $64.46 segments, reflecting the city's growing inbound tourist numbers.   

Other revenues also experienced an increase by 11.0 percent, helping hotels in Beirut record a rise in TrevPAR levels by 17.7 percent to $112.71. Meanwhile, considerable top line revenues growth drove payroll levels down by 4.8 percent to 36.3 percent of total revenue this month, allowing GOPPAR to rise by 70.9 percent $26.20, compared to $15.33 earned the same period in 2016. 

Although Beirut hotels recorded positive performance this month, there is still room for improvement, especially in GOPPAR conversion, which only reached 23.2 percent of total revenue. “The Lebanon economy is driven by the service sector and tourism in particular. In the first five months of the year, the number of tourist arrivals increased by 12.8 percent year-on-year. And with the recent election of President Aoun and subsequent formation of a unity government, this should mark the beginning of a period of stability for Lebanon, which will be positive for its hotels,” Alonso added. 


Manama's hotels did not record results at all similar those of Beirut. In the Bahrain capital city's month of mixed results, hotels recorded a 1.3-percent increase in room occupancy to 51.6 percent. However, the growth was not high enough to offset the 3.8-percent decline in achieved average room rate to $162.28, pushing RevPAR to drop by 1.3 percent this month to $83.76.

Non-rooms revenues saw even more declines, including food and beverage’s drop by 5.1 percent. Food and beverage's negative performance led to a TrevPAR decrease by 3.1 percent to $136.21. However, the hotel's cost cutting, which included a 0.4-percent saving in payroll to 34.8 percent of total revenue, swooped in to prevent even more negative performance. As a result, profit per room in Manama's hotels rose by 4.0 percent to $33.07 while its year-to-date 2017 GOPPAR levels dropped by 7.7 percent to $42.52.