Market Report Europe

Festival Fever Fuels Strong Profit Growth For Europe's Hotels in October

European Chain Hotels Market Review - October 2018
Beer mugs - Photo by Quentin Dr on Unsplash
Festival Fever Fuels Strong Profit Growth For Europe's Hotels in October


European hoteliers had cause for celebration in October, as hotels recorded a 6.1-percent year-on-year increase in profit per room. Performance was boosted by a number of major festivals hosted in key cities, according to the latest data tracking full-service hotels from HotStats.

Whilst GOPPAR levels actually dipped against September—dropping to €79.57 for the month, against €96.80 last month—the considerable year-on-year growth in October was sufficient to continue to drive a strong year-to-date increase in profit per room, which is now 9.8 percent above the same period in 2017.

Growth in profit this month was aided by a 6.1-percent increase in RevPAR, fuelled significantly by a 5.2-percent increase in achieved average room rate to €171.79.

In addition to year-on-year growth in rooms revenue, hotels in Europe recorded a revenue increase across non-rooms departments, including Food & Beverage (up 0.6 percent) on a per-available-room basis, which contributed to the 3.6 percent uplift in TRevPAR this month to €197.42.

Top-line performance was led by demand from the commercial sector, which accounted for almost 40 percent of all accommodated roomnights.

And whilst there was a decline in the achieved rate in the individual leisure segment in the month (down 2.4 percent), this was cushioned by year-on-year growth in rate in the residential conference (up 6.8 percent), corporate (up 0.6 percent) and group leisure (up 10.8 percent) segments.

Profit & Loss Key Performance Indicators – Europe (in EUR)

October 2018 v. October 2017

RevPAR: +6.1% to €133.27

TRevPAR: +3.6% to €197.42

Payroll: -0.6 pts. to 29.7%

GOPPAR: +6.1% to €79.57

The growth in revenue this month was complemented by cost savings, which included a 0.6-percentage-point reduction in payroll to 29.7 percent of total revenue—despite a 0.1-percentage-point increase in overheads to 20.2 percent of total revenue.

As a result of the movement in revenue and costs, profit conversion at hotels in Europe was recorded at 40.3 percent of total revenue in October.

“Profit performance for hotels in Europe is proving to be very consistent, with just two months of year-on-year GOPPAR decline recorded since October 2016,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “This is despite slowing economic growth across the Eurozone.”

Strong performance across the region was led by contribution from a number of key city markets that hosted major festivals and conferences.

The greatest margin of year-on-year performance growth was recorded in Munich, which hosts the renowned Oktoberfest. The 16-18 day festival annually attracts more than six million people, significantly driving up demand for hotel accommodations in the city. This year was no different, with hotels in Munich recording a 52.4-percent year-on-year increase in profit per room for the month to €132.38, which is a high for 2018, and was 85.9 percent above the year-to-date GOPPAR of €71.22.

The growth in profit was led by an increase across all departments, which included a 33.5-percent increase in RevPAR to €188.30, as room occupancy grew by 5.2 percentage points to 82.2 percent, and achieved average room rate soared by 25.0 percent to €229.11.

Profit & Loss Key Performance Indicators – Munich (in EUR)

October 2018 v. October 2017

RevPAR: +33.5% to €188.30

TRevPAR: +29.4% to €248.99

Payroll: -6.1 pts. to 21.1%

GOPPAR: +52.4% to €132.38

The significant increase in revenue enabled huge cost savings to be made, which included a 6.1-percentage-point reduction in payroll to 21.1 percent of total revenue.

Beyond Octoberfest, the city was supported by a range of major international conferences hosted at the ICM–Internationales Congress Center München, including the 2018 ESMO oncology conference, which attracted more than 24,000 attendees.

As a result of the robust top-line performance and reduction in costs, profit conversion at hotels in Munich was recorded at 53.2 percent of total revenue.

Outside Munich, hotels in Budapest also performed well in October, due in large part to the Hungarian capital hosting the city-wide CAFe Budapest Contemporary Arts Festival, which helped drive a 15.6-percent increase in RevPAR to €123.26.

The growth in rooms revenue in the city was supported by increases in non-rooms revenues, including Food & Beverage (up 14.5 percent) and Conference & Banqueting (up 12.7 percent), which contributed to the 12.2-percent year-on-year increase in TRevPAR to €171.31.

Falling costs, which included a 0.5-percentage-point decrease in payroll, to 22.1 percent of total revenue, added to the positive story for hotels in Budapest and equated into profit conversion of 47.7 percent of total revenue.

Profit & Loss Key Performance Indicators – Budapest (in EUR)

October 2018 v. October 2017

RevPAR: +15.6% to €123.26

TrevPAR: +12.2% to €171.31

Payroll: -0.5 pts. to 22.1%

GOPPAR: +17.1% to €81.75

HotStats provides two reporting tools to hoteliers:

Our unique profit and loss benchmarking service which enables monthly comparison of hotels’ performance against their competitors. It is distinguished by the fact that it provides in excess of 100 performance metric comparisons covering 70 areas of hotel revenue, cost, profit and statistics providing far deeper insight into the hotel operation than any other tool.

Our latest innovation in daily revenue intelligence, MORSE. Amongst its reporting are daily and highly granular market segmentation metrics as well as distribution channel and source of booking analysis. It takes daily market intelligence to a whole new level.

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