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European Hotels End Their 12-Month Revenue Growth

News May put to an end the 12-month consecutive revenue growth of hotels in Europe. After a year of growing profit, hotels in the region recorded a drop in GOPPAR (gross operating profit) of 3.6%. Falling revenues and rising costs were the main reason for such a decline. The long period of prosperity ended despite the fact that Rooms Revenue remained at the same level of 131.46 euro per room.

That said, non-room departments didn’t perform equally well. The declines of Food & Beverage and Conference & Banqueting departments estimated 3.7% and 8.8% respectively. Leisure segment lost 5.4% year-on-year. This has led to a decline in TrevPAR of 1.1% to the level of 193.66 euro. Therefore, May is the first month since April 2017 that has brought revenue declines to hotels of the region. This fact also illustrates how strong the performance of hotels in Europe last year was.

Key metrics of hotels in Europe in May 2018 are the following. RevPAR remained flat (0.0%, 131.46 euro) while TrevPAR lost 1.1% to 193.66 euro. Payroll added 1.2 pts to 31.6%, and, finally, GOPPAR lost 3.6% to 75.43 euro. Flat RevPAR is also something new for hotels in Europe. Since October 2016, this important metric was growing. Even though hotels across Europe managed to increase the average room rate by 2.1%, this growth was completely wiped out by the decline in room occupancy of 1.6% to 75.3%.

Hotels in Amsterdam were one of the few exceptions that struggled with the negative trend and stayed profitable in May 2018. Room occupancy added 1.6% to a solid result of 87.4% in total, and the achieved room rate added 0.5% to 265.93 euro. The increase in Rooms revenue was 2.3%, but it was wiped out by the falling non-room revenues, leaving GOPPAR flat at 0.0% to 148.25 euro. Profit per room estimated 148.25 euro in May 2018, so even with the flat result it was still one of the best months for hotels in the Dutch capital with only September 2017 being better.

One more prominent European capital, Paris, was one of the markets that enjoyed a great month. Paris hotels saw a significant increase in demand in the leisure segment in May. The increase in the Individual Leisure and Group Leisure segments estimated 19.3% and 2.6% respectively. This helped the average room rate grow by 3.2% to 372.18 euro. Occupancy was also growing by 2.8%, and this fact helped TrevPAR add 7.4% to 401.21 euro. RevPAR grew by 7.5% to 265.16 euro, and GOPPAR added solid 12.0% to 84.89 euro. Even though May 2018 results are still behind the levels prior to the terror attacks in November 2018, GOPPAR is almost 17 euro higher than a year ago, showing a promising upward trend.


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