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A Challenging Decade for European Hotels

News European hotel industry seems to be growing and improving its performance through years, however, a detailed report shows that many destinations face serious challenges. For example, hotels on the top of their cycles before the 2008 crisis, like Vienna and Prague hotels, still cannot recover from the downturn. A number of locations have not increased their profit since 2007.

A new detailed study covers a decade of hotel performances across Europe. Hotels in Prague still cannot reach the pre-crisis profit level. The global downturn together with rising costs left hotels in the capital of the Czech Republic with a profit of 51.85 euro in 2016. That is 16.1% below the level of 2007 when the profit reached 61.78 euro.

Payroll remains one of the biggest costs for hotels. The minimal impact of payroll on profit is in Prague – 23% of total revenue. Hotels in Paris face the highest payroll pressure that estimates 46% of total revenue. The growing cost of demand is another source of problems for European hotels as, according to current trends, they have to pay rising commissions for online travel agents. Rooms cost of sales includes such costs as reservation fees, agent’s commissions, Internet booking fees, and GDS fees. The increase of such costs is drastic in some locations. Hotels in Berlin reported the growth of rooms cost of sales of 320% for the period of 2009-2016. As RevPAR for the same period added only 36.6%, the profit of Berlin hotels is lower than a decade ago. Of course, there are some destinations that managed to increase their profit. The largest profit increase was reached by Dublin hotels, where the growth reached 218%.


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