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

Hotels in the United States did not have much to be thankful for in November as they posted a 5.2 percent year-on-year drop in profit per room—the single biggest margin of decline thus far in 2018, according to the latest HotStats data tracking full-service hotels.

November marked the third month in 2018 that U.S. hotels recorded a drop in profit, following a year-on-year decline in both January (down 0.5 percent) and July (down 2.2 percent). Profit per room dropped to $84.26 for the month, a full one-third decline off the $126.34 GOPPAR recorded in October.

Profit & Loss Key Performance Indicators
November 2018 vs. November 2017

RevPAR: -0.7 percent to $150.58
TRevPAR: -0.3 percent to $248.29
Payroll: +1.4 pts. to 37.1 percent
GOPPAR: -5.2 percent to $84.26

Profit levels were hit by increasing costs, which included a 1.4 percentage point uptick in labor costs to 37.1 percent of total revenue, as well as a 0.7 percentage point increase in overheads, which grew to 23.8 percent of total revenue. As a result, profit conversion came in at 33.9 percent of total revenue, well off the year-to-date figure of 38.2 percent.

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

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

Hotels continued an upward trend in achieved average room rate, which has now grown by 5.7 percent over the last 24 months, on a rolling 12-month basis, to $208.29. As average room rate has risen, room occupancy has been flat to down over the last 24 months. Occupancy fell by 1.4 percentage points to 73.6 percent, 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 recenter the conversation on cost creep, principally in labor expense,” said David Eisen, director of Hotel Intelligence and Customer Solutions at HotStats.

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