European Chain Hotels Market Review – January 2010
London began 2010 as it ended 2009, with, by far, the highest Gross Operating Profit per Available Room (GOPPAR) across the sample of European cities in the latest HotStats survey from TRI Hospitality Consulting.
With a 20.2% increase in profitability in the month of January, London’s GOPPAR of €63.67 was approximately 35% above the closest comparable city, Paris, at €41.35. The growth in profitability was primarily led by a 9.3% increase in Revenue per Available Room (RevPAR).
Although the weakness in Sterling has enabled London hoteliers to return room occupancy to pre-credit crunch levels, akin to those achieved in January 2008, London hoteliers continue to drive profitability with a 5.9% increase in Total Revenue per Available Room (TrevPAR) and astute cost management. Payroll costs were clearly on the minds of London hoteliers as they toasted in the New Year, with hotels operating at a lean 28% in January, following a 3.1% decrease in payroll as a percentage of total revenue.
"As the main expenditure for hoteliers, the movement in payroll provides a good indication of the greater cost control measures being employed. Throughout 2009 London hoteliers have successfully managed this cost. It is also telling that those markets which have been able to reduce their level of payroll as a percentage of total revenue this month are the only cities in our sample which have benefited from a year-on-year increase in profitability,” said Jonathan Langston, managing director, TRI Hospitality Consulting.
Despite the strong performance, London was not the only city to benefit from a growth in profitability in January. Other bright starters in 2010 included Berlin (+33.9%), Vienna (+54.9%) and Warsaw (+29.3%). However, following the 65% drop in profitability in Vienna this time last year, due to massive increases in bedstock and the recession, anything less than year-on-year growth in January 2010 would have been seen as a disaster.
Barcelona close to a loss
Despite a 2.8 percentage point increase in room occupancy levels, Barcelona hoteliers found themselves close to operating at a loss in January with a GOPPAR of only €0.84, according to the latest HotStats survey.
Although the Catalonian capital ended 2009 with several months of occupancy growth, the increase in January was helped further by a 1.1% increase in the number of international tourist arrivals to Spain. This was the first year-on-year growth in visitor numbers for 18 months following an 8.7% decline in 2009, down to 52.5 million.
However, following a decline in achieved average room rate of almost 10% in January 2009, to €122.21, the city suffered a further decline in this measure, of approximately 10% in January 2010, down to €110.11. As a result of the decline in average room rate and an increase in payroll as a percentage of total revenue (1.3%), GOPPAR in Barcelona crashed by 60%.
January is typically a challenging month for the hotel industry and Barcelona hoteliers struggled to maintain profitability, particularly in the absence of the weekend short break and highyielding major conference sectors. Although the GOPPAR level is particularly low for this month, it is clear from our cumulative rolling 12 month’s performance that this is not the norm and is a direct result of the seasonality of demand in the city.
Outside bet Warsaw beating profitability levels of firm favourites
A year-on-year increase in RevPAR of almost 12% helped to grow GOPPAR in the Polish capital by almost 30%, according to the latest HotStats survey. At €29.85, GOPPAR in Warsaw for the month of January was above the levels achieved in mature hotel markets across Europe, including Amsterdam (€28.74), Berlin (€23.40) and Munich (€21.00) and was helped by a 3.1% decrease in payroll as a percentage of total revenue, to only 30.1%.
As the EU contracted by 4.1% overall, Poland was the only member in the 27-state EU to have sustained economic growth during 2009, by 1.7%, with its Baltic neighbours suffering doubledigit declines, And as it is anticipated that January will be a good indication of what hoteliers can expect in 2010, with recent news that a 2.6% increase in GDP is expected in the next 12 months, Warsaw is well-positioned to sustain its position as a market for growth (Source: Wall Street Journal).
“The market performance in Warsaw has been highly unpredictable in the last 12 months, but returned to profitability in December 2009 thanks to significant cost cutting. Having returned to GOPPAR levels close to those achieved in January 2008, the Polish capital is well-positioned to grow its business. Particularly in light of the anticipated economic growth and value for money tourism product,” added Langston.
RELATED DOCUMENT
European Chain Hotels Market Review – January 2010 London began 2010 as it ended 2009, with, by far, the highest Gross Operating Profit per Available Room (GOPPAR) across the sample of European cities in the latest HotStats survey from TRI Hospitalit...
