Finance & DevelopmentFinanceTrevPAR Grew and Profits Slid for U.S. Hotels in July 2017

TrevPAR Grew and Profits Slid for U.S. Hotels in July 2017

U.S. Hotels’ GOPPAR dropped by 0.7 percent in July 2017, as the 1.1 percent increase in TrevPAR was cancelled out by escalating costs, according to the latest HotStats poll of full-service hotels. Although year-on-year RevPAR growth remained flat in July 2017 at $157.48, increases in non-rooms revenues, including food and beverage (2 percent) and conference and banqueting (1.5 percent), led to a recorded 1.1 percent increase in TrevPAR to $234.20. In spite of the year-on-year increase, the TrevPAR achieved in July 2017 was the second lowest of the year so far, behind only January ($225.52) and 8.3 percent below the year-to-date average of $255.32.

July is not a particularly strong month of performance for hotels in the U.S., according to HotStats. The start of the summer holidays typically heralds a decline in demand from the high-yielding corporate and residential conference segments, as evidenced by the proportion of rooms revenue from the commercial segment falling to just 37.4 percent in July 2017 against a year-to-date average of 44 percent.

Rising costs including a 1.9 percentage point increase in labor to 35.7 percent meant GOPPAR for July dropped by 0.7 percent to $83.41. “With performance dipping during the summer, it is undoubtedly a challenging period for hotels in the U.S. to post profit uplift, particularly as they are carrying the cost burden from the rest of the year when top line performance is more buoyant,” said Pablo Alonso, CEO of HotStats. “Having worked hard to achieve an increase in total revenue this month, hotel owners and operators will be particularly disappointed that this has been entirely wiped out by rising costs.”

San Diego Performance
In contrast to U.S. performance overall, July was a positive month for hotels in San Diego, primarily due to the significant uplift in demand associated with the Comic Con convention. RevPAR at San Diego hotels in July peaked for the year so far at $228.73—0.2 percent behind the same period in 2016 and 15.5 percent above the year-to-date average of $198.01. San Diego is already an extremely popular tourist destination, attracting approximately 34 million visitors annually. Comic Con is reportedly the largest event of its kind in the world and provides boost to hotel demand each year in July.

Despite the year-on-year decline in RevPAR, hotels in San Diego recorded growth in non-rooms revenues, which contributed to a 1.6 percent increase in TrevPAR to $333.27, with non-rooms revenue contributing 31.3 percent to total revenue. “Thanks to Comic Con, San Diego was one of the top performing hotel markets in the U.S. in July. With the event reportedly injecting approximately $80 million of direct spending into the city, San Diego hoteliers will be keen that it returns year after year,” added Pablo. However, with a 3.2 percentage point year-on-year increase in labor costs to 25 percent of total revenue, GOPPAR atSan Diego hotels fell by 1.3-percent for July to $168.94.

Miami Performance
Conversely, despite its strong profile as a tourism destination, this summer was one of the lowest periods of performance for hotels in Miami. GOPPAR dropped to a year-to-date low of just $40.76 in July, equivalent to 24.9 percent of total revenue. The decline in bottom line performance was led by plummeting top line revenues, with RevPAR falling to just $110.96—26.9 percent below the year-to-date average of $151.55. While a drop in demand has impacted key performance metrics in July, profitability at Miami hotels is also being challenged by a slew of additions to hotel stock.