Source: HotStats

Profit Levels at Berlin Hotels Hit by Creeping Costs

Whilst total revenue levels at Berlin hotels fell by 8.3% this month, creeping costs in the German capital contributed to an 18.8% year-on-year drop in profit, according to the latest data from HotStats.

Despite a packed summer schedule in the city, which included the six-day Classic Open Air Festival and Berlin Fashion Week, occupancy for Berlin hotels fell by 5.0 percentage points year-on-year to 80.1%, which in addition to a 2.6% decline in achieved average room rate, contributed to an 8.4% year-on-year decline in RevPAR (Revenue per Available Room).

And with declining revenue levels recorded in ancillary departments, including Food and Beverage (-6.6%) and Conference and Banqueting (-2.3%), Berlin hotels suffered an 8.3% decrease in TrevPAR (Total Revenue per Available Room) to €139.59.

Despite successfully reducing costs on a per available room basis, hotels in Berlin suffered increases in both payroll (+1.8 percentage points) and overheads (+0.6 percentage points) as a percentage of total revenue.

As a result of the movement in revenue and costs, profit conversion at Berlin hotels fell to just 21.5% of total revenue this month. This is a trend that Berlin hotels have been struggling with throughout 2016, as despite RevPAR declining by just 0.6% year-to-date, to €106.71, profit per room has fallen by 3.1% to €47.25 on a per available room basis.

In contrast to most months for year-to-date 2016, the increase in achieved average room rate at hotels in Madrid in July was not sufficient to offset the drop in room occupancy, which contributed to a 10.2% decline in profit per room for the month.

Year-to-date 2016, Madrid hotels have been able to strategically drive price at the expense of volume, in order to achieve a 1.9% increase in RevPAR, to €101.14. In turn, this has contributed to a 1.2% year-on-year increase in TrevPAR to €147.68.

However, this month the 3.0% decline in RevPAR was accompanied by a drop in ancillary revenues, including Food and Beverage (-12.2%) and Conference and Banqueting (-31.4%), which led to a 5.2% drop in TrevPAR.

As a result of the decline in revenue and increasing costs, year-on-year profit per room for the month fell by 10.2%. However, this was not sufficient to damage year-to-date 2016 performance, with hotels in Madrid recording a 5.0% increase in GOPPAR (Gross Operating Profit per Available Room) to €48.79.

Despite hotels in Prague achieving a year-on-year GOPPAR increase of 1.9% in July, the increase was almost entirely due to growth in the Rooms department as significant profit declines were recorded in the Food and Beverage (-20.0%) and Leisure (-21.9%) departments.

Hotels in Prague successfully recorded a 2.3% increase in RevPAR for July, to €76.34, as a 0.9 percentage point decline in occupancy was offset by a 3.3% increase in achieved average room rate, which contributed to a 2.2% increase in Rooms department profit per room.

However, an 8.3% year-on-year decline in revenue in the Food & Beverage department was further exacerbated by an increase in both cost of sales (+29.6%) and payroll (+7.5%), which contributed to the 20.0% year-on-year decline in departmental profit.

The picture for the leisure department was even more challenging, with a 31.3% increase in revenue cancelled out entirely by an increase in cost of sales (+14.3%) and payroll (+121.4%), which contributed to the 21.9% drop in Leisure department profit per room.

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.

Sita Banigo
Sales Executive
HotStats Limited