Macro-Level Obstacles Little Match for Global Hotel Industry
The global hotel industry is producing strong performance numbers all against a climate of financial unease. It’s an incongruity that hoteliers hope sustains.
Consumer costs for everything, including hotel rooms, are up. The list is long: gas prices, food prices, airfare prices (not to mention a wave of air cancellations) are all at dizzying highs. The list is long and induces unease, but consumers are still, it appears, willing to put them aside in order to travel.
In Europe, occupancy rates are at their highest levels since November 2019 and in tandem with average daily rates that are now on par or higher than pre-pandemic 2019, on a nominal basis. May 2022 European ADR was €30 higher than in May 2019 and is now up 127% since its all-time low in May 2020.
The strong room performance carried through into ancillary revenue. Food and beverage revenue has been on a steady incline since January of this year and now sits $6 off its May 2019 level on a per-available-room basis. The combined efforts in the room and F&B departments pushed total revenue to €184 on a per-available-room basis, its highest level since October 2019.
The healthy top-line performance carried through to the bottom line as hoteliers were able to keep expenses in check as best they could. Despite a global energy crisis, utility expenses actually fell in May against the four previous months to around €7 per available room. Still, utility costs remain at all-time highs and May’s level was nearly €2 higher than in May 2019.
Meanwhile, labor costs are trending up and hit €52 per available room in May, which is now on par with pre-pandemic labor costs.
Gross operating profit per available room (GOPPAR) was recorded at €71, now up €75 since GOPPAR turned negative in January 2022. May’s GOPPAR is now at the same level as May 2019.
U.S. Levels Off
Performance in the U.S. is chugging forward, but could be plateauing if the last three months are any indication. After seeing steep inclines across most revenue metrics from January through March, the past two months have leveled off, but are around 10% off pre-pandemic levels.
May, which benefitted from the Memorial Day holiday and saw TSA throughputs consistently above 2 million on a daily basis, saw TRevPAR hit $227, which was on par with the previous month, but still $40 down versus May 2019.
Total revenue was fed by strong numbers in the rooms department, which, as has become the norm, was led by an ADR that remains above pre-pandemic levels. In a propitious sign, corporate travel numbers are steadily improving with corporate ADR at record levels combined with a corporate revenue mix percentage in May that is now 3 percentage points off its May 2019 comp.
Despite a number of headwinds, GOPPAR is staying afloat. After being recorded at above $90 in March, it has stayed around that mark through May, hitting $94 in the month, which is $8 off its pre-pandemic number.
Middle East Comes Back to Earth
After hitting a profit high in March, Middle East GOPPAR has had two consecutive months of decline, but the good news is that the region continues to track above pre-pandemic levels and the dip is likely more to do with seasonality than COVID-19 or other factors.
GOPPAR hit $73 in May, a full $16 higher than in May 2019. Rate continues to drive the profit gains, with ADR hitting $184; however, rate has slid back since its high mark in April of close to $285.
Cost creep, however, is having an impact on the bottom line. Total payroll is still below pre-pandemic levels but is climbing and is now $22 higher above its April 2020 low. Meanwhile, utility expenses are ticking upward but more likely a trend in seasonality with utilities going up in the region’s warmer months.
China Tries to Find Footing
After COVID lockdowns hampered much of the country’s travel and tourism industry, China is still underperforming vis-à-vis the rest of the globe, but there are some signs of life.
Occupancy is still well down versus 2019 but did move 6 percentage points up in May over the previous month. The problem, however, is a depleted rate that now sits $23 lower than in May 2019. In fact, China ADR is only $2 higher than it was at its pandemic low in April 2020.
The good news is that as travel returns, so, too, shall hotel performance. GOPPAR in May hit only $5.53, but was coming off back-to-back months of negative GOPPAR. Here’s hoping for the start of a more positive and strong summer season.
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.
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