May HotStats Market Review - GOPPAR Growth Continues Unabated at U.S. Hotels
Hotels in the U.S. recorded a fourth consecutive month of year-on-year profit growth in May as a result of ongoing robust increases in revenue and in spite of rising costs, according to the latest worldwide poll of full-service hotels from HotStats.
The growth this month was led by a +1.3 percent increase in TrevPAR, which was as a result of year-on-year growth across all revenue centers, including rooms revenue (+1.1 percent); and non-rooms revenues, including food/beverage (+1.1 percent) and conference/banqueting (+2.9 percent) on a per available room basis.
The growth in rooms revenue this month was entirely due to a +2.0 percent increase in achieved average room rate, which grew to $211.68, and was in spite of a -0.7 percentage point decline in room occupancy, which dropped to 79.5 percent.
At $168.35, RevPAR at hotels this month was well behind the punchy performance recorded in March ($180.07) and April ($179.32) as demand slowed from the recent peaks.
Profit & Loss Key Performance Indicators - USA (in USD)
May 2018 v May 2017
RevPAR: +1.1% to $168.35
TrevPAR: +1.3% to $272.79
Payroll: +0.6 pts to 34.1%
GOPPAR: +1.6% to $109.89
Despite the growth in top line performance, hotels recorded a +0.6 percentage point increase in labor costs, which grew to 34.1 percent of total revenue.
As a result of the movement in revenue and costs, flow through at hotels in May was recorded at 51.9 percent, which is reasonable considering the lacklustre TrevPAR increase.
And despite the limited increase this month, year-to-date growth in bottom line performance at hotels remained steady at +3.4 percent for the five months to May 2018, to $103.93.
"Further to the record breaking revenue performance in March and April, the U.S. hotel market is now heading into the slower summer period, as commercial activity lessens.
However, the story remains positive as May was not only the fourth consecutive month of profit growth, but it would have been the eighth month in a row in which hotels had recorded an increase in GOPPAR were it not for the slight slip in January," said Pablo Alonso, CEO of HotStats.
In line with the growth across the country, hotels in New York City have recorded consistent increases in profit per room in 2018, which were punctuated by a +4.5 percent year-on-year increase this month, to $168.72 per available room.
The +6.2 percent increase in profit per room for year-to-date 2018 is further to the buoyant performance in 2017, during which hotels in the city recorded a +2.8 percent increase in GOPPAR. This was in spite of the addition of more than 5,000 bedrooms to hotel supply.
The growth in profit per room at hotels in New York City this month was driven by increases across all revenue departments, but led by a +2.7 percent increase in RevPAR, as hoteliers continue to drive growth in both room occupancy (+1.3 percentage points), to a heady 90.2 percent, as well as achieved average room rate, which increased by +1.3 percent year-on-year, to $348.60.
While hotels in New York continue to drive increases in achieved average room rate, more recently the growth in this measure has been led by the leisure segment, as commercial rates in the city continue to come under pressure, illustrated by the drop in rate recorded in the residential conference (-2.0-percent) and corporate (-5.0 percent) segments for year-to-date 2018.
Nevertheless, as a result of growth in the rooms department, as well as increases in non-rooms revenues, including food/beverage (+7.5 percent) and conference/banqueting (+10.0 percent) on a per available room basis, TrevPAR at hotels in New York City increased by +4.8 percent this month to $460.88.
Profit & Loss Key Performance Indicators - New York City (in USD)
May 2018 v May 2017
RevPAR: +2.7% to $314.27
TrevPAR: +4.8% to $460.88
Payroll: +0.7 pts to 43.0%
GOPPAR: +4.5% to $168.72
In spite of the robust revenue growth, profit levels at hotels in New York City continue to be challenged by high labor costs, which were recorded at 43.0 percent of total revenue this month, which is approximately +9.0 percentage points above the national average.
As a result of the +0.7 percentage point increase in labor costs, profit conversion at hotels in New York City dropped by -0.1 percentage points to 36.6 percent of total revenue in May. And with a flow through of just 34.6 percent this month, it is clear that market conditions are impacting the ability of hoteliers in the Big Apple to convert the growth in top line to bottom line increases.
In contrast to the growth in New York City and the U.S. overall, hotels in Boston suffered a -1.9 percent drop in profit per room this month to $174.84, although profit conversion remained punchy at 46.8 percent of total revenue.
Further to the mixed profit performance in 2016 (-0.5 percent) and 2017 (+1.2 percent), hotels in Boston once again find themselves under pressure from additions to supply, with hotels in the Massachusetts capital recording a -14.1 percent year-on-year decline in profit in the five months to May 2018.
"Having historically been a market with high barriers to entry, it seems that the flood gates to the Boston hotel market have now opened with the addition of 700 bedrooms in 2017 and a further 1,100 rooms scheduled to open on 2018.
The data would suggest that new supply began to impact Boston hotel performance in late 2017, with profit hit hard since the beginning of 2018," added Pablo.
The 1.0 percent increase in total revenue at hotels in Boston in May to $373.28 was fueled by increases in non-rooms revenues, which offset the 2.6 percent year-on-year drop in rooms revenue to $265.13.
Profit & Loss Key Performance Indicators - Boston (in USD)
May 2018 v May 2017
RevPAR: -2.6% to $265.13
TrevPAR: +1.0% to $373.28
Payroll: +1.6 pts to 30.4%
GOPPAR: -1.9% to $174.84
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