While hotels in mainland Europe generated revenue in August, they had trouble holding onto it, according to the latest report from HotStats.
Despite a 0.9 percent year-over-year increase in revenue per available room and 0.4 percent growth in total RevPAR, gross operating profit per available room for the month turned negative, down 0.8 percent year over year. That GOPPAR drop was the third consecutive month of year-over-year decline and the seventh month this year, making it “more a trend than a blip,” the report said. The only positive year-over-year growth in GOPPAR was in May, when it was up 5.8 percent.
Rising costs had a hand in the profit decrease. Payroll on a per-available-room basis was up 1.1 percent year over year and overheads were up 2.3 percent, noted the report.
RevPAR for the month was led by a 0.2-percentage-point increase in room occupancy to 79 percent, as well as a 0.6 percent increase in achieved average room rate, which grew to €167.72, according to HotStats.
At the same time, a 0.7 percent year-over-year decline in ancillary revenues, led by a 1.1 percent drop in food and beverage revenue, slowed the growth in total revenue, reflected in the 0.4 percent TRevPAR growth rate to €183.72, the data showed.
“Strong growth in average room rate, resulting in positive RevPAR growth, has been the catalyst for increased profit at hotels in mainland Europe for a number of years,” said Michael Grove, HotStats’ managing director/EMEA. “However, a global concern continues to be weakening RevPAR growth, which combined with rising costs, is squeezing profits.”
“The days of positive profit growth have unfortunately dried up in Mainland Europe,” said David Eisen, HotStats’ director of hotel intelligence and customer solutions, emphasizing that since January, positive profit growth was only reported in May. “Every other month to August has been negative. This is even more worrisome considering that between May 2017 and January 2019, there had only been two months of negative profit growth.
“European hotel investment hit record highs in 2018, so it remains to be seen if any month-over-month profit decline will impact 2019 transactions. As eeking out profit becomes harder, European hoteliers will need to focus more on flow through and engage in tactics that better manage variable cost. Hoteliers are certainly looking forward to a better Q4, but their work is cut out for them,” said Eisen.
For hotels in Dublin, August was the eighth consecutive month of profit decline, which HotStats credits to the city’s growing hotel supply.
The 11.4 percent year-over-year decline for the month contributed to the ongoing decrease in profit at hotels in the city, which was recorded at -10.7 percent in the eight months to August and is a significant change in trajectory from the period of substantial annual GOPPAR growth since 2015, according to the report
The drop in profit this month was led by a 6.2 percent decrease in RevPAR, which was primarily due to a 7 percent year-over-year decline in average room rate, which has been on the decline since the beginning of 2019, noted HotStats.
Despite the year-over-year decline in August, profit per room at hotels in Dublin remained relatively robust at €104.27, which was 18.3 percent above the year-to-date figure, illustrating the appeal of the Irish capital as a leisure destination, according to the report
The news comes five months after data and analytics company GlobalData reported on slowing inbound tourism growth for Ireland as a whole. Last year, compound annual growth rates for inbound arrivals were nearly half the rate for the previous years, from 8.1 percent in 2014 to 2018 to 3.8 percent for 2018 to 2023.
Prague, Czech Republic
The capital of the Czech Republic remains a popular visitor destination, with the leisure segment making up 56.8 percent of roomnights sold in August, according to the report
HotStats noted an increase in volume and price helped drive a 7.3 percent year-over-year increase in RevPAR to €86.63, which was supported by growth in ancillary revenues, including an 18.8 percent uplift in food and beverage revenue.
The only blight on a strong performance was the 10.1 percent increase in payroll to €31.04 per available room, as hotels in Prague continue to battle with this rising cost, according to the report
Nevertheless, August was still a positive month of performance, with profit conversion recorded at 42.5 percent of total revenue, noted HotStats.