HotStats: May Data Indicates Global Hotel Performance Stabilizing

LONDON — Though the global hospitality industry is still in critical condition due to COVID-19, the latest HotStats report found that as of May 2020 and on a month-over-month basis, hotel performance is either stabilizing or picking up, indicating that April may have been the low point for the industry. As parts of the world reopen and more hotels receive guests, the performance data should continue to improve, absent any new wave of infection, according to the report.

The United States Eases Into Reopening

In the United States between April and May, total revenue per available room (TRevPAR) rose 39 percent month-over-month (MOM)—down 92 percent year-over-year (YOY)—and gross operating profit per available room (GOPPAR) increased 32 percent MOM to -$17.25 (down 116.2 percent YOY), according to HotStats.

Absent a surge in cases, the expectation is that MOM numbers will continue to improve, especially as more states move into a phase of reopening that allows non-essential travel to commence.

Occupancy and room rate in May fell significantly below 2019 levels, but did climb 4 percentage points and 5 percent, respectively, from April. May RevPAR of $13.76 (down 92.2 percent YOY) increased 54 percent from April and declined 79 percent from RevPAR of $66.27 in March—the first month that COVID-19 impact showed up in hotel industry performance numbers.

Further and expected YOY expense drops showed up in the data, as many hotels remained closed or operated at limited capacity. Labor costs on a per-available-room basis were down 74.4 percent YOY, while utility costs were down 45 percent YOY. The HotStats report noted that, according to anecdotal reports, some hotels have seen water bills rise due to increased laundry operations and additional and more frequent washing of things like linens due to cleaning protocols. One hotelier told HotStats that his water bill increased 33 percent.

Profit margin was -87.3 percent of total revenue, up 93 percentage points from April, but down 125 percentage points from the same time a year ago.

Profit & Loss Indicators — U.S. (in USD)

Europe Bottoms Out

Europe passed the peak of coronavirus infections in early May 2020, according to the European Centre for Disease Prevention and Control (ECDC). As several countries started to loosen some lockdown restrictions, profit-per-available-room declines showed a significant deceleration on a MOM basis. GOPPAR in May was down 1.2 percent compared to April and even though GOPPAR remained 125.5 percent below May 2019, this reduction is an indicator that the region hit its bottom.

Occupancy recorded an uptick of 1.3 percentage points MOM to 7.3 percent, which resulted in a 17.9 percent MOM increase in RevPAR. These results are still far from the numbers recorded in May of the previous year, but they are the first signs of recovery in the region. The closure of most ancillary revenue streams fueled the 5.4 percent MOM decline in TRevPAR, which equals a 94.2 percent YOY slump.

Labor costs accompanied the hike in occupancy, recording a 1.2 percent MOM expansion, while overhead costs were cut by 0.9 percent MOM. Profit conversion in May was recorded at -166.1 percent of total revenue, down 11.1 percentage points from April and off from 37.8 percent in the same month of the previous year.

Profit & Loss Indicators — Europe (in EUR)

Asia Pacific Upturn

Like other regions, Asia-Pacific (APAC) hotel performance appears to have bottomed out and is now on the rise little by little. May 2020 results show the first MOM upticks for both top-line and bottom-line metrics since December 2019. GOPPAR for the region took a 78.2 percent MOM jump, and at -$3.04 is making strides toward breaking-even after turning negative in March.

Occupancy almost reached 30 percent in May 2020, and at 26.6 percent, was a 7.4-percentage-point increase compared to April. And even though this is still 43.6 percentage points below May 2019 numbers, it’s the first time since February that occupancy has placed above 25 percent in the region. This rise in volume drove the 39.5 percent MOM surge in RevPAR. Further contributing to the top-line, F&B revenue per available room was up by 89.8 percent MOM, resulting in a much needed 48.1 percent MOM expansion of TRevPAR.

Despite top-line growth, hoteliers in APAC were able to avoid cost creep and managed to reduce labor costs and overheads by 6.7 percent and 1.3 percent, respectively, on a MOM basis. As a result, profit conversion in May was recorded at -7.5 percent of total revenue, placing 43.4 percentage points above the previous month.

Profit & Loss Indicators — APAC (in USD)

Middle East Momentum

May 2020 saw MOM jumps for the Middle East in both total revenue and profitability. RevPAR in the region dropped off precipitously after February, and in May it hit $23.03, which, though 78.4 percent down from the same time a year ago, was up 5.9 percent over April, underpinned by a five-percentage-point uptick in occupancy. Though occupancy was up in the month, average rate decreased 14.5 percent in May over April, a sign that hoteliers in the region are resigned to sacrifice rate in order to build back occupancy, according to HotStats.

TRevPAR grew 10.5 percent in May 2020 over the month prior, bolstered by F&B revenue, which saw a 25 percent MOM increase.

Expenses continued to fall, including labor and total overheads, down 50.6 percent and 50.5 percent YOY, respectively. Meanwhile, on a MOM basis, labor and overheads costs were relatively static, a sign of an industry balancing out amid a slow return to normalcy.

After breaking even in March, GOPPAR fell into negative territory in months thereafter. While May remained negative in dollar amount, it was 20 percent better than April. It’s still down 120.8 percent YOY.

Profit margin was up 13 percentage points in May 2020 over April to -34.8 percent of total revenue.

Profit & Loss Indicators — Middle East (in USD)

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