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Growing Expenses Cut Down Profits of Hotels in Mainland Europe

Hotels in Mainland Europe have to face various challenges this year. It is clear that their performance is far from all-time highs. In July, the average room rate lost 5%, making RevPAR (revenue per available room) drop by 3.2% YOY. As total revenues were not getting any better, GOPPAR (gross operating profit per available room) lost significant 9.4% in July 2019 when compared to July 2018. With this result, July became the sixth month of GOPPAR decrease this year.

Hotels lose their ancillary revenues as well, and this fact makes the total revenue result even worse. For example, the decline in the Food & Beverage department estimated 1.7% in July to 45.69 euro per available room. Because of these factors, TRevPAR of hotels in mainland Europe lost 2.8% to 191.76 euro when compared to July 2018. It looks like hotels cannot adapt to changing conditions after a strong last year. Room rates keep falling for the second consecutive month, reducing revenues of hotels across the region.

Naturally, some destinations perform better than others. For example, hotels in Nice had a positive month and enjoyed a typical summer popularity increase. The French Riviera is a popular summer vacation destination and July 2019 once again proved that. Room occupancy hit a fantastic level of 90.2%, and the average room rate hit 267.92 euro. This helped to boost RevPAR by 4.8%. With growing ancillary revenues (+0.9%), TRevPAR added a solid 4.0% to 302.63 euro.

Hotels in Nice could also reduce their costs which led to further increases in profit. The year-on-year GOPPAR added 8.0% to 141.89 euro. This is significantly higher than the year-to-date profit per room of hotels in Nice – 52.80 euro. The result proves that the coastal city remains a popular destination during the summer months.

The preliminary August 2019 data of London hotels shows that the British capital successfully overcame challenges during the last summer month. Despite falling occupancy (-0.3% to 86.7%) and supply that grows faster than demand (+1.5% vs. +1.2%), London hotels raised their average daily rates by 4.8% to GBP151.58. This helped RevPAR to grow by 4.5% to GBP131.39 and reach an important milestone. The absolute RevPAR is the highest result of London hotels in any August on record. Even though the final occupancy for the moth is negative, hotels in the capital of the U.K. had their occupancy above 90% during 11 days in August.

18.09.2019

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