Finance & DevelopmentFinanceAugust 2017 GOPPAR Levels Hit a 2017 Low

August 2017 GOPPAR Levels Hit a 2017 Low

Despite recording a 0.6 percent increase in RevPAR, GOPPAR at U.S. hotels fell to a year-to-date low of $71.01 in August 2017 as demand levels slowed during the summer, according to the latest worldwide poll of full-service hotels from HotStats. The year-on-year RevPAR increase is due to growth in both room occupancy (0.4 percentage points) and achieved average room rate (0.1 percent).

While room occupancy in August was broadly in line with the year-to-date average of 77.8 percent, the achieved room rate for the month—$187.00—was 7.8 percent below the average of $202.83 for the eight months leading up to August 2017, suggesting that significant discounting was deployed to boost demand.

As in July, the weakened commercial segment during the summer break proved to be a key challenge for hoteliers this month—the achieved corporate rate of $186.43 was 9.9 percent below the year-to-date average of $206.89. The August residential conference segment rate of $201.07 was 18.5 percent below the year-to-date average of $246.85.

Profit & Loss Key Performance Indicators
August 2017 vs. August 2016
RevPAR: +0.6 percent to $145.56
TrevPAR: +0.4 percent to $217.27
Payroll: + 2.5 pts to 37.7 percent
GOPPAR: -2.5 percent to $71.01

In contrast to RevPAR growth, hotels in the U.S. suffered declines in non-rooms revenues, including food and beverage (-2.5 percent) and conference and banqueting (-5.6 percent). As a result, year-on-year TrevPAR growth was tempered at just 0.4 percent to an average of $217.27.

Rising costs, which included a 2.5 percentage point increase in labor to a 37.7 percent of total revenue, canceled out TrevPAR growth and contributed to the 2.5 percent drop in profit per room for August to $71.01.

“History would suggest that hotels in the U.S. are familiar with the slump in demand during August, the associated shift in the market mix, and subsequent impact on top-line revenues,” said Pablo Alonso, CEO of HotStats. “However, the nationwide increases in minimum wage and cost creep in other departments have contributed to profit per room at hotels in the U.S. falling to its lowest level this year, which is not such a familiar, or very welcome, scenario.”

The impact of the summer slowdown was less pronounced in New York City due to the broad base of demand, which enabled hotels to record a 0.4 percent year-on-year increase in RevPAR to $254.74 in spite of a 0.9 percent decline in the achieved average room rate of $286.26. However, a 1.9 percent increase in TrevPAR was canceled out by rising costs. As a result, profit per room at hotels in New York City fell by 0.5 percent this month to $76.23.

Profit & Loss Key Performance Indicators – New York City
August 2017 vs. August 2016
RevPAR: +0.4 percent to $254.74
TrevPAR: + 1.9 percent to $322.40
Payroll: +3.9 pts to 52.3 percent
GOPPAR: -0.5 percent to $76.23

For hoteliers in Seattle, it was a much brighter picture in August. In addition to room occupancy levels hitting 91.2 percent, high demand levels fuelled a 2.0 percent increase in achieved an average room rate to $277.61. For hotels in Seattle, the year-to-date rate performance of $221.91 was 20 percent above the achieved rate in the eight months leading to August 2017.

Profit & Loss Key Performance Indicators – Seattle
August 2017 vs. August 2016
RevPAR: +2.1 percent to $253.07
TrevPAR: +2.2 percent to $303.75
Payroll: +1.7 pts to 23.9 percent
GOPPAR: -0.7 percent to $163.37

“Seattle is emerging as one of the top visitor destinations in the U.S. and has been on an upward trajectory in recent years, hitting a record 38.9 million tourists in 2016,” Alonso said. “The elevated profile of the city as a tourist destination, as well as the better weather, means that hotel performance peaks during the summer months. Demand levels are also boosted by the city being a major port for cruise ships journeying to and from Alaska, as well as hosting major events, such as those associated with the annual Seafair celebrations.”

Despite the top line increase, hotels in Seattle recorded a 0.7 percent year-on-year decline in GOPPAR, to $163.37. That said, hotels in Seattle remain highly profitable, recording a profit conversion of 53.8 percent of total revenue in August, which is more than double the conversion at hotels in New York City at 23.7 percent of revenue.