HotStats European Chain Hotels Market Review – July 2012

A decline was suffered across most headline performance measures in London during July, but the UK capital still achieved a profit per room approximately 50% above Paris, which was second of the top performing cities polled in Europe this month, according to the latest HotStats survey by TRI Hospitality Consulting.

As room occupancy in London suffered a 9.7 percentage point decline for the month, hotels in London still managed to achieve a room occupancy close to 82%, with higher room occupancy levels achieved in only Amsterdam (85.3%) and Paris (86.4%) this month.

Despite being outperformed in terms of volume during July, four and five-star hoteliers in London achieved the highest average room rate (€232.17), Revenue per Available Room (RevPAR) at €189.72, Total Revenue per Available Room (TRevPAR) at €249.69 and profit per room at €137.30 of the ten cities polled this month.

Whilst Paris hotels were able to rely on the typical cavalcade of the Tour de France, as well as demand potentially displaced from London, to boost visitor numbers to the city in July, hotels in London this year were able to capitalise on periods of extremely strong demand associated with the first week of the Olympic Games and the Farnborough Air Show, which attracted approximately 110,000 visitors and $72 billion of investment, reflecting the calibre of attendees to this event.

"Amsterdam and Paris are both extremely popular leisure destinations during the summer, evidenced by the strong room occupancy levels. However, London was on another level this year, which is unsurprising considering the scale of events which were taking place in the city. Whilst room occupancy took a bit of a battering as leisure visitors sought alternative destinations, the periods of peak demand were strong enough to support strong results across the remaining measures," said Jonathan Langston, managing director at TRI Hospitality Consulting.

Meanwhile, strong room occupancy levels in Amsterdam during July were aided by a reduction in room rate across all sectors, resulting in an achieved room rate decline of 6.9% to €157.57 for the month, approximately 11% below the year-to-date average for the Dutch city.

The movement in volume and price in Amsterdam contributed to a 5.6% drop in TRevPAR to €173.35, with profit per room dropping by 9.1% to just €69.93, which is well below the profit achieved in London during July and 7.0% below the year-to-date average in the Dutch city, illustrating the reliance of the market on commercial-related demand.

Eastern European hoteliers enjoying strong summer trading

Although cities in Western Europe have lost ground on previously high watermarks, hotels in Eastern Europe are flying high this summer, according to the latest HotStats survey.

For hotels in Eastern Europe, 2012 has been a bumper year so far with year-to-date growth in profit per room recorded in both Warsaw (+53.5%) and Prague (+15.5%).

Whilst the benefits to hoteliers of hosting major events, such as the Olympics, are considerably reduced in established leisure destinations such as London, hotels in Warsaw have been revelling in the elevated profile that the 2012 Euro Championships have afforded the city and region.

With hotels in Warsaw squeezing every penny they can out of the Euro Championships, the city's hoteliers recorded a year-on-year growth in room occupancy of 5.8 percentage points in July to 81%, coupled with a 10.1% increase in achieved average room rate to €84.16 to achieve year-on-year RevPAR growth of approximately 19% for the month.

The growth in RevPAR contributed to a 10.4% increase in TRevPAR in the Polish capital, to €99.72, and a 23.9% increase in profit per room. Whilst this increase was not quite as impressive as the growth in profit in June, it was one of the greatest margins of increase in the European cities polled this month.

Eastern Europe has been a popular destination this summer, with hotels in Prague recovering from what appeared at the time to be insurmountable declines in performance, during 2009 and 2010, to record a 28.9% increase in profit per room in July. This contributed to a year-to-date increase in Gross Operating Profit per Room (GOPPAR) of 15.5% to €30.87 from €26.72 during the same period in 2011.

"The recovery in headline performance levels in Prague gives hope to all those markets which have witnessed major additions to supply in recent years. The Czech capital was one of the worst hit markets at the onset of the current economic downturn, but has recovered well, primarily thanks to a revival in the leisure sector," added Langston.

Whilst the Czech capital has remained a popular tourist destination throughout the economic downturn, it has been only recently that the huge increases in bedstock have finally been absorbed, allowing the market to flourish once again.

The high demand levels enabled hoteliers in Prague to achieve a 19.8% increase in the rate achieved in the leisure sector, to €84.22, and a 8.3% increase in the rate achieved in the group tour segment, at €46.65.

About HotStats

HotStats provides monthly P&L benchmarking and market insight for the global hotel industry, collecting monthly detailed financial data from more than 8,500 hotels worldwide and over 100 different brands and independent hotels. HotStats provides more than 550 different KPIs covering all operating revenues, payroll, expenses, cost of sales and departmental and total hotel profitability.

Jonathan N. Langston
Managing Director
HotStats Limited