Industry NewsCoronavirusU.S. Hotels Report Profit Growth in January Amid Coronavirus Concerns

U.S. Hotels Report Profit Growth in January Amid Coronavirus Concerns

LONDON — U.S. hotels eked out a 0.6 percent year-over-year (YOY) increase in GOPPAR in January, but as the full scope of the coronavirus virus becomes clearer, subsequent months could put pressure on hoteliers to generate both top- and bottom-line growth, according to HotStats’ U.S. January Market Report.

Revenue also increased in January, as rooms RevPAR grew 2.7 percent YOY on the back of an increase in average rate (up 1.1 percent YOY) and occupancy (up 1 percentage point). Positive revenue growth in food and beverage pushed total revenue to a 3.2 percent YOY increase, as non-rooms revenue grew 3.9 percent YOY.

Still, hoteliers had trouble with flow-through, evidenced by the smaller increase in profit of only 0.6 percent. This came as a result of a jump in expenses, led by a 5.3 percent YOY increase in total labor costs on a per-available-room basis, which raised its percentage of total revenue by 0.8 percentage points to 40.8 percent. In the rooms department, total costs moved 4.5 percent higher than the previous year.

Profit & Loss Performance Indicators — U.S.
January 2020 vs. January 2019

RevPAR: +2.7% to $143.38
TRevPAR: +3.2% to $234.19
Payroll: +5.3% to $95.51
GOPPAR: +0.6% to $67.79

Hoteliers had difficulty keeping undistributed expenses down in January. On a per-available-room basis, administrative and general costs were up 6.5 percent YOY, IT costs were up 3.7 percent YOY, and sales and marketing costs were up 6.1 percent YOY. Property and maintenance costs were the only ones to come down, at 0.5 percent YOY, inclusive of a 3.7 percent YOY decrease in utilities.

The sharp expense growth led to profit margin sinking 0.8 percentage points in January to 28.9 percent.

New York Hotel Performance in January 2020

Already negatively impacted from oversupply, New York will now contend with the likely reduction in the number of foreign travelers, especially Chinese, due to fear and travel restrictions brought about by the coronavirus.

Profit & Loss Performance Indicators – New York
January 2020 vs. January 2019

RevPAR: +0.3% to $169.27
TRevPAR: +1.7% to $246.62
Payroll: +3.5% to $187.52
GOPPAR: -14.7% to -$22.93

This has the potential to take a large bite out of the Big Apple: foreign visitors, both for business and leisure, spend much more, on average, than domestic travelers, reports show, with Chinese travelers spending the most on a per-person basis, according to NYC & Co., the city’s tourism and marketing arm. And if occupancy does plummet in the coming months, it could exacerbate what is already a struggling performance for its hotel industry.

In January, revenue wasn’t the issue; hoteliers felt the sting on the bottom-line. Rooms RevPAR was only up slightly year over year at 0.3 percent while TRevPAR increased 1.7 percent YOY on the back of stronger F&B returns.

More alarming is the fact that hoteliers actually lost money in January. GOPPAR decreased $22.93—down 14.7 percent from the same time a year prior, when GOPPAR was down $19.99. Profit margin declined 1.1 points to 9.3 percent. Any revenue from the top line was gobbled up by expenses, including labor costs, which jumped 3.5 percent YOY. Rooms expenses jumped 3.7 percent YOY, while undistributed expenses were up, too, including administrative and general, at 4.1 percent YOY, on a per-available-room basis.

Houston Hotel Performance in January 2020

Houston, on the other hand, had no issue generating hotel profit in January. GOPPAR grew 10.4 percent YOY as rooms RevPAR shot up 11.8 percent with gains in both occupancy (up 3.8 percentage points) and average room rate (up 5.2 percent). Total revenue climbed 8.9 percent YOY, as non-rooms revenue increased 4.4 percent YOY.

Profit & Loss Performance Indicators – Houston
January 2020 vs. January 2019

RevPAR: +11.8% to $112.15
TRevPAR: +8.9% to $178.36
Payroll: +8.1% to $60.38
GOPPAR: +10.4% to $63.05

On the expense side of the ledger, labor costs moved up 8.1 percent YOY on a per-available-room basis, but the strong growth in revenue resulted in a 0.2 percentage point decline in labor cost as a percentage of total revenue to 33.9 percent. Total expenses on a per-occupied-room basis increased 0.3 percent YOY. As a result of the strong growth in revenue, profit margin rose 0.5 percentage points to 35.4 percent.

 


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