Industry Update
Performance26 February 2018

January 2018: RevPAR Grows But Profit Slips for U.S. Hotels

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TRI Hospitality Consulting

Profit per room at U.S. hotels dropped by 0.5 percent in January, in spite of an increase in revenues across all departments, including RevPAR, according to the latest poll of full-service hotels from HotStats.

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It was a relatively muted start to 2018 for U.S. hotels, which recorded a 0.6 percent increase in RevPAR to $138.17, from $137.33 during the same period in 2017.

The growth in RevPAR was due to an increase in both room occupancy (+0.2 percentage points) to 67.9 percent, as well as a 0.3 percent increase in achieved average room rate to $203.42.

In addition to the growth in rooms revenue, increases across non-rooms departments in January, including food and beverage revenue (+2.9 percent), enabled U.S. hotels to record TrevPAR growth at 1.8 percent for the month to $229.59.

The growth in headline performance levels at U.S. hotels in January was primarily led by year-on-year increases in the conference segment. This was illustrated by the (+3.0 percent) increase in revenue in the conference and banqueting department, as well as the 2.5 percent increase in achieved rate in the residential conference segment to $238.34, which was compared to declines in rate in the corporate (-2.2 percent) and leisure (-1.0 percent) segments this month.

Profit & Loss Key Performance Indicators – US (in USD)

January 2018 v January 2017

  • RevPAR: +0.6% to $138.17
  • TrevPAR: +1.8% to $229.59
  • Payroll: +0.3 pts to 39.3%
  • GOPPAR: -0.5% to $73.03

However, the growth in top line performance at U.S hotels in January was cancelled out by a 0.3 percentage point increase in labor costs to 39.3 percent of total revenue, as well as an uplift in overhead costs.

As a result, GOPPAR fell by 0.5 percent to $73.03, which was equivalent to a profit conversion of 31.8 percent of total revenue.

In contrast to hotels across the country, one year on from the peak top and bottom line performance recorded at hotels in Washington D,C,. in January 2017, which were driven by the inauguration of President Trump, revenue and profit levels fell back down this month.

Although room occupancy remained relatively robust for January at 59.0 percent, achieved average room rate in the city plummeted by 37.1 percent to $189.23. Despite being well behind the achieved rate in January 2017 ($301.01), it remained above the rate recorded during the same period in 2016, at $181.08.

Profit & Loss Key Performance Indicators – Washington D.C. (in USD)

January 2018 v January 2017

  • RevPAR: -39.7% to $111.62
  • TrevPAR: -31.6% to $171.21
  • Payroll: +18.5 pts to 61.0%
  • GOPPAR: -87.2% to $10.11

In addition to the drop in rooms revenue, falling non-rooms revenues contributed to the 31.6 percent year-on-year decline in TrevPAR at hotels in Washington D.C., in January to $171.21.

Albeit expected following the unique events of this time last year, labor costs skyrocketed this month by +18.5 percentage points to 61.0 percent of total revenue, further exacerbating the decline in revenue.

"This month was always going to look bad for hotels in Washington D.C., after the benefit of the inauguration this time last year. And performance was certainly not helped by Congress being shut down for several days, as well as an extended cold snap that meant the city suffered some of the lowest temperatures on record," said Pablo Alonso, CEO, HotStats.

As a result of the movement in revenue and costs, profit per room at hotels in Washington D.C., fell by 87.2 percent year-on-year to just $10.11, equivalent to a profit conversion of just 5.9 percent of total revenue.

While Miami also felt the cold snap for a few days, the more temperate climate meant that room occupancy levels for January remained strong at 83.9 percent.

In addition, RevPAR levels were among the highest recorded in the last 12 months following an 8.5 percent year-on-year increase to $185.34, which was driven by an 8.9 percent increase in achieved average room rate to $220.94.

The bumper month of rooms revenue performance for hotels in Miami was supported by year-on-year increases in non-rooms revenues, including food and beverage (+13.5 percent) and conference and banqueting (+29.5 percent), which contributed to the 9.9 percent increase in TrevPAR this month to $267.67.

Furthermore, Miami was one of very few hotel markets to buck the trend of escalating labor costs in January, recording a 1.9 percentage point drop in this measure to 27.8 percent of total revenue.

As a result, at $120.98, GOPPAR at hotels in Miami was 16.5 percent ahead of the same period in 2016, and 60 percent above the rolling 12 month average at $75.57, once again illustrating the strength of demand in South Florida during this time of year.

Profit & Loss Key Performance Indicators – Miami (in USD)

January 2018 v January 2017

  • RevPAR: +8.5% to $185.34
  • TrevPAR: +9.9% to $267.67
  • Payroll: -1.9 pts to 27.8%
  • GOPPAR: +16.5% to $120.98

About HotStats

HotStats provides a unique profit-and-loss benchmarking service to hoteliers from across the globe that enables monthly comparison of hotels' performance against competitors. It is distinguished by the fact that it maintains in excess of 500 key performance metrics covering 70 areas of hotel revenue, cost, profit and statistics, providing far deeper insight into the hotel operation than any other tool. The HotStats database totals millions of hotel rooms worldwide. For more information, visit www.hotstats.com.

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