European Chain Hotels Market Review - January 2013
There were exceptions to the rule in 2013, with strong performance levels recorded in Amsterdam, Dublin and Frankfurt, but GOPPAR (Gross Operating Profit per Available Room) levels for European hotel markets polled in January were on average 70% below the rolling 12-month average, according to the latest HotStats survey by TRI Hospitality Consulting.
January is renowned for being a tough month for hotels across Europe, with poor weather conditions and a slow start to the year after Christmas and New Year holidays delaying business as usual. But for many of Europe’s hotel markets lower revenue levels coupled with a high fixed-cost base have resulted in much lower profits being recorded this month.
Due to its reliance on the commercial sector, accounting for approximately 46 per cent of rooms sold in 2012, hotels in Brussels were particularly badly hit by the January blues and in 2013 room occupancy levels declined to just 54.8%, against a typically buoyant annual average of 70%.
The high cost base at hotels in the Belgian capital, exemplified by payroll levels of approximately 46% of total revenue in January, compared to the annual average of 36.7%, exacerbated an already compromised revenue performance, which led to hotels recording a profit per room of just €6.83 or 7% of total revenue. This is equivalent to one quarter of the rolling 12 months average of €29.62 or 23.5% of total revenue.
“The impact on annual performance from a poor start to the year should not be understated. With hotel markets polled in our sample achieving total revenue levels on average 30% lower than the running annual average and payroll levels at more than 50% of total revenue, it presents a real challenge to hoteliers to regain ground lost in the first quarter,” said David Bailey, deputy managing director at TRI Hospitality Consulting.
It was a similar story in Vienna this month, as profit per room recorded in the Austrian capital was just €5.92 or 5.4% of total revenue. Whilst Vienna has an arguably stronger leisure profile than Brussels, the city is renowned as a conference destination, but with a poor calendar of events and below freezing temperatures and regular snow discouraging weekend visitors, performance figures in January are well behind the rest of the year.
Despite a 2.6% drop this month, RevPAR (Revenue per Available Room) at hotels in Vienna remained at approximately 60% of the rolling 12 months average, at €63.79, with TrevPAR (Total Revenue per Available Room) recorded at 70.6% of the annual total. Yet hotels in Vienna were caught out by high operating costs, with payroll costs at more than half (52.5%) of total revenue. As a result, profit per room in Vienna was recorded at just 14.5% of the rolling 12-month average.
Frankfurt, Dublin and Amsterdam buck the January blues trend
In contrast to the performance levels of a number of hotels in the European markets polled in January, for which profit per room was recorded at only a fraction of the annual total, hotels in Frankfurt exceeded the annual average thanks to a good month of events at the Messe Frankfurt, according to the latest HotStats survey by TRI Hospitality Consulting.
Whilst hotels in Frankfurt achieved an average room rate increase of only 1.0%, the 45,500-attendee strong Paperworld trade fair fuelled a 4.2 percentage point increase in room occupancy, which resulted in an 8.4% increase in RevPAR. The contribution from the rooms department was in addition to increases in both food (+16.8%), beverage (+11.9%) and meeting room hire revenue (+35.8%) and resulted in a TrevPAR increase of 9.1% to €137.61, which left the total revenue achieved in the city in line with annual averages.
For hotels in Frankfurt, at 33.1% payroll levels were also in line with the 12-month rolling average (32.6%), as with astute cost management in other departments, hotels in Germany’s fifth largest city recorded a 10.4% increase in GOPPAR to 100.9% of the 12-month running average of €43.73.
Hotels in Dublin were able to carry on where they left off in 2012 as one of the standout performers in the European market, with an 8.5% increase in RevPAR this month. Whilst profit per room remained approximately 75% below the rolling 12-month average, hotels in Dublin made strides towards closing the gap with a 115.8% increase in GOPPAR from the extremely low base of €6.26 in January 2012.
Hotels in Amsterdam also had a positive month, which was a welcome change in fortune after a relatively poor year for the city in 2012. The 2.6% increase in TrevPAR levels for the city was primarily as a result of a 5.5% increase in RevPAR, which offset declines in both food and beverage revenue (-1.2%) and meeting room hire revenue (-3.4%) per available room.
The 11.2% increase in GOPPAR in January 2013 was in contrast to the 1.8% decline in this measure in the same month last year, but at €23.02 profit per room for hotels in Amsterdam remained approximately 70 per cent below the rolling 12 month average at €70.99. This is unsurprising due to the reliance of the Dutch city on demand from the leisure sector, which is well below average in January.
“Whilst the European Commission has conceded that the Eurozone economy will shrink by 0.3% in 2013, which will undoubtedly provide further challenges to hoteliers across Europe in the year ahead, for those who had a good January it is important that the momentum of growth is carried forward into the forthcoming months,” added Bailey.
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TRI Hospitality Consulting provides a wide range of services to clients in the hotel sector. It has offices in London, Dubai and Madrid.
For more information contact:
Jonathan Langston, managing director 020 7892 2201
David Bailey, deputy managing director 020 7892 2202
Charles Scudamore, director 0207 892 2211
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