Profit Levels Fall as U.S. Hotels Hit Stormy Period in September

Hotels in the U.S. recorded a 5.9 percent decline in profit per room for September 2017 as trading for much of the South and Southeast regions were disrupted by one of the most devastating hurricane seasons on record, according to the latest worldwide poll of full-service hotels from HotStats.

The 2.1 percent decline in RevPAR at U.S. hotels in September was due to a 0.6 percentage point drop in room occupancy to 77.7 percent, as well as a 1.3 percent drop in achieved average room rate to $202.79.

In addition to the drop in RevPAR, U.S. hotels suffered declines in non-rooms revenues, including food and beverage (-6.8 percent) and conference and banqueting (-9.1 percent) on a per available room basis. As a result, year-on-year growth in TrevPAR fell by -3.2 percent to $242.93.

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Profit & Loss Key Performance Indicators – U.S. (in USD)
September 2017 vs. September 2016
RevPAR: -2.1 percent to $157.49
TrevPAR: -3.2 percent to $242.93
Payroll: +2.6 pts to 35.5%
GOPPAR: -5.9 percent to $89.97

The drop in total revenue was further impacted by rising costs, including a 2.6 percentage point increase in labor to 35.5 percent of total revenue. As a result, profit per room at hotels in the U.S. fell by 5.9 percent to $89.97, equivalent to a profit conversion of 37.0 percent.

While hotels in the U.S. have faced a challenging period of operation over the last three months, year-to-date profit levels remain 1.1 percent ahead of the same period in 2016, at $93.71.

Hotel Performance in Miami for September 2017
Hotels in Miami were among the worst hit in the Southeast region by September’s hurricane activity, with Irma being the most significant cause of disruption to the city. Despite a last-minute shift away from Miami and towards the west coast of Florida, which limited destruction to property, the city-wide evacuation left hotels abandoned for more than one week and, as a result, top line performance crashed.

The biggest impact was on volume, illustrated by the 17.4 percentage point decline in room occupancy to just 63.7 percent, well below the averages typically achieved in the city. And in spite of a 2.8 percent increase in achieved average room rate to $140.23, year-on-year RevPAR levels at hotels in Miami dropped by 19.2 percent to $89.33.

Profit & Loss Key Performance Indicators – Miami (in USD)
September 2017 vs. September 2016
RevPAR: -19.2 percent to $89.33
TrevPAR: -28.7 percent to $128.45
Payroll: +7.8 pts to 44.6%
GOPPAR: -60.6 percent to $19.32

“This year has been one of the costliest Atlantic hurricane seasons on record, with experts predicting that it will even outpace the 2005 season when storms such as Katrina, Rita, and Wilma wreaked havoc on the east coast with an estimated economic toll of $211 billion,” said Pablo Alonso, CEO of HotStats. “The timing of the storm meant that hotels in Miami also lost out of demand from the Labor Day weekend, typically a strong period of trading.”

While there was a market-wide drop in demand from all segments, significant declines in achieved average room rate were recorded in the corporate (-14.0 percent) and residential conference (-24.0 percent) segments, suggesting demand from the commercial sector stayed away. As a result of the significant drop in volume, hotels in Miami recorded declines in revenue across all departments which contributed to the 28.7 percent drop in TrevPAR to $128.45.

In addition to plummeting revenue levels and the temporary closure of a number of hotels before and after Irma made ground, properties were unable to react quickly enough to slash their cost base and, as a result, profit per room at hotels in the city plunged by 60.6 percent to just $19.32, the lowest recorded measure in recent years.

Hotel Performance in Houston for September 2017
In contrast to the negative impact of the hurricane season on hotels in Miami, properties in Houston recorded one of their strongest months of year-on-year top and bottom line growth in September, which was primarily as a result of the flooding associated with Hurricane Harvey.

As one of the world’s major energy hubs, hotels in Houston have been hit hard by the crash in oil prices and associated impact on demand, which has led to a 17.0 percent decline profit per room in the last 24 months to $62.51 in the 12 months to September 2017. In September, however, hotels in the city successfully recorded a 16.7 percent increase in RevPAR, which was primarily due to a 10.9 percentage point increase in room occupancy to 83.0 percent.

“In the aftermath of the flooding caused by hurricane Harvey, hotels in Houston have been inundated with demand for accommodation, which was helped by a 14-day suspension of local hotel and motel occupancy tax for relief-effort personnel and storm victims,” said Alonso. “However, the bitter sweet respite in top and bottom line performance decline is likely to be short lived, as the flood waters recede and the city goes back to the challenges of business as usual.”

Profit & Loss Key Performance Indicators – Houston (in USD)
September 2017 vs. September 2016
RevPAR: +16.7 percent to $127.68
TrevPAR: +0.2 percent to $167.71
Payroll: +0.2 pts to 28.3%
GOPPAR: +11.9 percent to $77.69

The uplift in demand resulted in hotels in Houston achieving an 11.9 percent increase in GOPPAR to $77.69, which represented one of the strongest months of performance in 2017 with profit per room recorded at 24.3 percent above the average for the 12 months to September 2017.