HotStats: Profit Growth Continues for U.S. Hotels

Any concern over a weakening U.S. economy has not yet infiltrated U.S. hotel industry profits.  GOPPAR increased 1.4 percent year-over year in August, matching RevPAR growth, which had a positive 1.4 percent gain, according to monthly data from HotStats.

August continued a streak of GOPPAR growth in 2019, with the only negative numbers in April, when GOPPAR was down 4.5 percent YOY.

Despite a YOY increase, the $76.95 GOPPAR was 24 percent below the year-to-date average of $101.21.

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While RevPAR was up for the month, occupancy was down 0.2 percentage points, but bolstered by a 1.7 percent gain in average room rate.

Total revenue per available room was up 2.2 percent for the month. Profit conversion came in at 32.8 percent of total revenue in August, negatively affected by a 3.4 percent YOY increase in payroll on a per-available-room basis.

In New York, occupancy, room rate, RevPAR, and TRevPAR were all up YOY, but it still translated into a 6.0 percent drop in GOPPAR, as labor costs jumped a precipitous 10.5 percent YOY in the month.

While demand for New York hotels consistently translates into some of the highest occupancy rates and room rates in the United States, the city is invariably besieged by rises in hotel supply. According to Lodging Econometrics, 65 new hotels/9,396 rooms will open in the city in 2019.

With over 65 million visitors annually, the leisure segment makes a significant contribution to accommodation demand for hotels in New York and comprised more than 43 percent of total demand in August.

Profit & Loss Key Performance Indicators – New York City (in USD)
KPI August 2019 v. August 2018
RevPAR +3.5% to $263.37
TRevPAR +4.6% to $342.44
Payroll +10.5% to $188.01
GOPPAR -6.0% to $70.53

In contrast to the challenges in New York, it was a positive month of profit performance for hotels in Houston, which came despite recording a 1.2 percent YOY decline in RevPAR to $80.99.

Some of the RevPAR losses were recouped by hoteliers recording an increase in ancillary revenues, which were led by a 2.9 percent increase in food & beverage, and tempered the 0.8 percent decline in TRevPAR to $116.17. August is historically the lowest TRevPAR month in Houston.

However, cost savings in payroll (down 0.3 percent) and overheads (down 7.9 percent) helped hotels in the city record a 16.4 percent YOY increase in profit per room.

Profit & Loss Key Performance Indicators – Houston (in USD)
KPI August 2019 v. August 2018
RevPAR -1.2% to $80.99
TRevPAR -0.8% to $116.17
Payroll -0.3% to $46.92
GOPPAR +16.4% to $31.46

 

“U.S. hoteliers continue to drive profits despite contending with monthly rises in expenses,” said David Eisen, director of hotel intelligence, Americas, HotStats. “With costs including labor and A&G rising in August at a rate higher than RevPAR, it’s become even more critical that costs are flexed in order to maintain profit levels.”