Forgot Password

Report: U.S. Hotels Suffer Profit Plunge in November

NATIONAL REPORT—For the month of November, hotels posted a 5.2% year-on-year drop in profit per room, the single biggest margin of decline so far in 2018, according to the latest data tracking full-service hotels from HotStats.

November was only the third month in 2018 that hotels in the U.S. recorded a drop in profit following a year-on-year decline in both January (down 0.5%) and July (down 2.2%).

Profit per room dropped to $84.26 for the month, a full one-third decline off the $126.34 GOPPAR recorded in October.

Profit levels were hit by increasing costs, which included a 1.4 percentage point uptick in labor costs to 37.1% of total revenue, as well as a 0.7 percentage point increase in overheads, which grew to 23.8% of total revenue.

As a result, profit conversion came in at 33.9% of total revenue, well off the year-to-date figure of 38.2%.

In concert with profit declines were modest revenue setbacks across departments, including rooms (down 0.7%), food/beverage (down 1.9%) and conference/banqueting (down 3.9%), on a per-available-room basis.

TRevPAR remained relatively unmoved, recording a decline of 0.3% year-on-year to $248.29, and was 5.1% below the year-to-date figure of $261.55.

On a lighter note, hotels continued an upward trend in achieved average room rate, which has now grown by 5.7% over the last 24 months, on a rolling 12-month basis, to $208.29. As ARR has risen, room occupancy has been flat to down over the last 24 months.

For November, occupancy fell by 1.4 percentage points to 73.6%, which was the second-lowest occupancy of the year, ahead of only January.

“While November isn’t historically as strong as September or October, it is normally a pretty positive month for hotels in the U.S.; however, softening toward the end of the year will no doubt re-center the conversation on cost creep, principally in labor expense,” said David Eisen, director of hotel intelligence & customer solutions at HotStats.

In line with the decline across the U.S., hotels in Seattle recorded a drop in profit per room in November, falling 9.8% YOY to $71.89.

This was the third month of decline in profit per room in 2018 for the city, following a larger drop in February of 11.1%. More worrisome, it is the second consecutive month of profit decline, following a 5.1% drop in October.

Profit pressure is partly a result of considerable additions to hotel supply in the city, which has primarily impacted top-line performance, illustrated by a 4.5% drop in RevPAR in November to $142.21—a combination of room occupancy down 2.6 percentage points, to 79.3%, and achieved average room rate down 1.4% to $179.38.

Further departmental declines were in food/beverage (down 5.3%) and conference/banqueting (down 4.5%).

Profit & Loss Key Performance Indicators – Seattle (in USD)

November 2018 v. November 2017

RevPAR: -4.5% to $142.21

TRevPAR: -3.6% to $203.67

Payroll: +2.7 pts. to 36.8%

GOPPAR: -9.8% to $71.89

As a result of the movement across all revenue departments, TRevPAR at hotels in Seattle fell by 3.6% this month to $203.67, which was 20.5% behind the year-to-date figure of $255.99.

Profit performance was further affected by an uptick in labor costs, which increased to 36.8% of total revenue. As a result, profit conversion at hotels in Seattle was recorded at 35.3% of total revenue.

“The Seattle hotel market has added 2,550 rooms since January 2017, highlighted by the recent opening of the 1,260-room Hyatt Regency Seattle, the largest hotel in the Pacific Northwest,” said Eisen. “The city’s hoteliers now face a challenging period of operation, which will be further exacerbated by properties in the planning or development phases across King, Snohomish and Pierce counties.”

Pacific Northwest neighbor Portland is also a market suffering from growing pains, as supply increases continue to impact top- and bottom-line performance levels.

In November, profit per room at hotels in Oregon’s largest city fell by 12.2%, which is a fifth month of profit decline in 2018 and a second consecutive month of GOPPAR decline, following the 12.6 % drop in October. (Year-to-date November, GOPPAR is up 0.6% in the city.)

Rising costs, which included a 1.2 percentage point increase in labor to 36.3%, contributed to profit per room being recorded at just $78.79 this month, 29% off the year-to-date figure of $110.55.

Profit & Loss Key Performance Indicators – Portland (in USD)

November 2018 v. November 2017

RevPAR: -6.8% to $141.45

TRevPAR: -4.4% to $228.31

Payroll: +1.3 pts. to 36.3%

GOPPAR: -12.2% to $78.79

Leave A Reply