HotStats: Hotel Industry Performance Metrics Are Slowly Recovering

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In April 2020, the hotel industry saw the bulk of its key performance indicators stoop to unprecedented levels due to the COVID-19 pandemic. The following 12 months have been slow, but as the world recovers from the pandemic, hotel performance metrics are recovering, too. But although performance is improving, numbers are still lagging from the pre-pandemic era.

United States

U.S. hotel profit has moved in the right direction since the beginning of the year, around the time when it first started to break even. As the country’s phased reopening continues, expectations are that the hotel industry will benefit. In April 2021, GOPPAR was at its highest level since February 2020; at $35.45, it was up 235 percent over April 2020.

The uptick in profit came from growing rooms revenue and total revenue as demand strengthened. After occupancy was in single digits back in April 2020, it has climbed considerably since, underpinned in particular by leisure travel as group and corporate business continue to lag. Leisure travel was almost 50 percent of the total traveler mix in April, a 22.9 percentage point uptick over the same time a year ago.

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TRevPAR in April 2021 hit $116.04, a 752 percent year-over-year (YOY) increase and $15 higher than March. Labor continues to be a struggle for hotels. More than 200,000 jobs were reportedly lost in the franchise lodging sector, representing a 33 percent drop in employment. A new bill introduced in Congress, the Save Hotel Jobs Act, looks to provide assistance to the hotel industry, both for workers and hotel owners.

Total labor costs on a per-available-room basis hit $41.76 in April 2021, the highest mark since the pandemic. As a percentage of total revenue, labor costs have come down slightly as revenues rebound. Profit margin in April 2021 was 30.6 percent, the same level as the previous month.

Europe

In Europe, performance is behind that of other regions as COVID-19’s impact on the continental population has not yet lessened. Occupancy remained below 20 percent in April 2021, and with average rate only up $8 since the same time a year ago, RevPAR only hit $16, which, though 225 percent higher YOY, is still off from its pre-pandemic level, down 85.5 percent from April 2019.

With TRevPAR still muted at $28.85 in the month and expenses creeping back as properties reopen, hotels suffered the ignominy of negative GOPPAR for the seventh consecutive month.

However, there is good news for Europe in an agreement by the European Union to relax travel restrictions from those outside the region. Ambassadors from the 27 E.U. countries agreed to ease the criteria for non-E.U. nations to be considered a “safe country” from where all tourists can travel. Up to now, that list consisted of only seven nations: Australia, Israel, New Zealand, Rwanda, Singapore, South Korea, and Thailand. The proposal would be positive for European tourism, after the number of foreign visitors dropped by 70 percent in 2020.

Asia Pacific

April was another month of continued success for Asia Pacific’s hotels, but an upsurge in COVID-19 cases could dampen performance. Occupancy in the month remained above 50 percent, as RevPAR surged to a level 241 percent higher than at the same time last year. Total revenue remained steady, and so, too, did GOPPAR, which at $25.80 was up 276 percent YOY.

Asia Pacific’s overall performance has been buoyed by China, where occupancy hit close to 70 percent in April, at or near historical levels. In the month, GOPPAR reached $41.78, which is less than $4 off its April 2019 level. And there is still room for improvement; while domestic business aircraft travel in China has recovered by a reported 95 percent, international charter activity is still sitting at less than 20 percent.

Middle East

The Middle East stayed on a positive performance path with GOPPAR levels in April 2021 357 percent higher than at the same time a year ago. Total revenue was at its highest peak since February 2020, boosted in part by ancillary revenue, such as food and beverage RevPAR, which hit $37.75 in the month, a 375 percent improvement over April 2020.

Meanwhile, labor costs are creeping back, with total labor PAR hitting $38.59 in the month, a 36.3 percent YOY increase. Still, labor costs remain some $20 down versus pre-pandemic historical levels. Summer months are some of the region’s slower months from a demand perspective and could damper the region’s overall recovery.

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