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Difficulties of Hotels in Mainland Europe in 2019

The start of 2019 was definitely challenging for hotels across mainland Europe. Local hotels experienced a drop in profit per room of 9.1% in January 2019 to January 2018. This is the biggest drop since August 2016. Of course, the first month of the year has always been not easy for hotels in the region, and we also shouldn’t forget that European hospitality industry enjoyed a really strong year in 2018 with GOPPAR jumping by 8.8%.

Weak January results were mostly caused by a drop of 1.3% in non-room revenues to 47.10 euro (36.7% of the total revenue). Such sectors as Conference & Banqueting (-0.8%) and Food & Beverage (-1.5%) were falling as well. RevPAR decreased by 0.2% to 81.19 euro, and even growth in achieved room rate of 1.5% to 141.04 euro couldn’t prevent revenues from falling. Occupancy also fell by 0.9%. These factors and other challenges like increased payroll (+1.3%) and growing overheads (+1.4%) were the reasons for significantly lower GOPPAR – minus 9.1% to 26.65 euro.

However, even though the start of the year doesn’t look very promising, it is too early to make judgments about 2019. Hotels may still think of a proper strategy to offset these challenges and come up with a new strategy of profit generation. That being said, Lisbon hotels definitely need this plan. The city had a mediocre start of the year with a 6.4% decrease in profit per room. It looks like Portugal has passed its peak popularity and now slowing down. At least, hotels in Lisbon have recorded declines for five consecutive months already.

July 2018 was the first month that started the negative trend. Before that, Profit added 20 euro to 53.55 euro in the rolling 12 months. This time, falling occupancy is the major factor of declines. The year-on-year occupancy in January 2019 fell down by 5.2% to 51.7%. However, thanks to the growing room rate (+12.5% to 121.08 euro), RevPAR even managed to grow a bit (+2.2%). However, rising costs made GOPPAR fall by 6.4% to 22.67 euro.

Hotels in Madrid, in their turn, posted very different results. The Spanish capital managed to reach a fantastic growth in GOPPAR of 31% to 32.18 euro. The profit growth has become possible thanks to an increase in average room rate by 9.1% to 151.61 euro. This metric boosted RevPAR that added 9.4% to 91.03 euro. Finally, increased non-room revenues together with a 3.7% decline in payroll made it possible to reach such a massive profit growth.

07.04.2019

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