Performance plummets for most regions: HotStats

HotStats compiled year-over-year (YOY) hotel performance data for the month of March. Here’s what the company found in the United States, Middle East, Europe and Asia Pacific: 

U.S. hotels get profit shock

U.S. hoteliers got their first taste of the impact of COVID-19 on hotel profit and loss in March, with gross operating profit per available room (GOPPAR) down 110.6% YOY to -US$12.71, according to data from HotStats. The triple-digit drop was by far the largest percentage decline ever recorded by HotStats. The previous high was -10.4% in March 2015. March also marked the first time in the HotStats database that the U.S. recorded a negative GOPPAR value.

The decrease in GOPPAR was a result of gaping drops on the revenue side. RevPAR for the month was down 64.4%, heavily influenced by a 48.8-percentage-point drop in occupancy to 31.5%. The presumption is that April occupancy will suffer even more, as many hotels were still open in early March.

The decline in RevPAR, combined with a more than 65% drop in total F&B RevPAR, led to a 62.1% decrease in total revenue (TRevPAR), the greatest decrease since January 2016, when TRevPAR was down 8.2% YOY.

Virus, oil war damage profit in the Middle East

Measures to contain the spread of the coronavirus in the Middle East were amped up in March but did little to limit the damage done to the region’s hotel industry: An oil price war between Saudi Arabia and Russia required international intervention. The combination reflected in the bleak profitability results recorded in the region in March. GOPPAR fell by a record 98.8% YOY, just about breaking even at $1.12.

Occupancy in March plummeted by 41.3 percentage points YOY to 34.6%, its lowest level since HotStats started tracking the region’s data. Average rate, which has been decreasing YOY consistently since June 2019, furthered its downward trend and recorded an 18.3% drop compared with March 2019. Consequently, RevPAR fell by 62.8% YOY. Declines across all other revenue centers resulted in a 61.7% YOY decrease in TRevPAR.

Trying to cope, hoteliers in the Middle East flexed costs to achieve a 27.0% YOY reduction in overheads and cut labor costs by 25.8% YOY. However, the efforts were not enough to sustain the region’s profit margin, which placed 39.5 percentage points below that of March 2019 at 1.5%.

The outbreak of COVID-19, combined with the oil price war, resulted in the worst Q1 performance ever recorded by HotStats in the Middle East in terms of profitability, as the 36.5% decline in GOPPAR was even greater than the 36.0% fall recorded in Q1 of 2011, amid the instability of the Arab Spring.

Profits plunge in Europe

With cases in China starting to plateau, the World Health Organization (WHO) declared Europe to be the new epicenter of the coronavirus outbreak in March, fueled by the rapid expansion of the virus across Italy and Spain. This prompted governments across the region to scale up the measures to contain the spread, and several lockdown and quarantine orders ensued.

The consequences on the European hotel industry were swift and devastating. Gross operating profit per available room (GOPPAR) in March 2020 plummeted by 115.9% compared to the previous year to -€8.33 (-US$9). This is the first triple-digit year-over-year decrease in profitability ever recorded in the HotStats database for Europe, as well as the first time GOPPAR turned negative in the region.

Driving this profitability slump was a massive contraction in demand. Occupancy in March plunged by 44.8 percentage points YOY to 27.4%, which in turn drove RevPAR down by 66.2%. A further 65.6% decline in total F&B revenue per available room contributed to the sharp 61.6% YOY fall in TRevPAR.

In response to this top-line nosedive, undistributed expenses on a per available room basis fell across the board, resulting in a 25.3% YOY decrease in overhead costs. Total labor costs also adjusted downwards by 28.8% YOY. However, these flex efforts were not enough to offset the lost revenue, and profit margin in Europe was recorded at -13.1% in March 2020, placing 45.7 percentage points below the same month of the previous year.

Things worsening in Asia-Pacific

Asia-Pacific, where the coronavirus first appeared, continues to serve as the baseline for global hotel data performance comparison. March data from HotStats indicates that the virus’ impact on hotel performance is not subsiding; it’s getting worse. After breaking even in February, gross operating profit per available room (GOPPAR) turned negative on a dollar basis in March and was down 117.8% year-over-year. The fall in GOPPAR set a record for the region, besting the previous record decrease of 98.9%, achieved only a month earlier. For the quarter, GOPPAR decreased 80.5% over the same time period last year.