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May 2018: GOPPAR Growth Continues Unabated At U.S. Hotels

Friday, June 29, 2018
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Hotels in the U.S. recorded a fourth consecutive month of year-on-year profit growth in May as a result of ongoing robust increases in revenue and in spite of rising costs, according to the latest worldwide poll of full-service hotels from HotStats.

Year-on-year growth in profit per room at U.S. hotels was recorded at 1.6 percent this month, to $109.89. This was a slowing from previous months, but helped maintain the upward trajectory in GOPPAR, which has now increased by 8.0 percent over the last 24 months, to $95.57 in the 12 months to May 2018.

The growth this month was led by a 1.3 percent increase in TrevPAR, which was as a result of year-on-year growth across all revenue centers, including rooms revenue ( 1.1 percent); and non-rooms revenues, including food/beverage ( 1.1 percent) and conference/banqueting ( 2.9 percent) on a per available room basis.

The growth in rooms revenue this month was entirely due to a 2.0 percent increase in achieved average room rate, which grew to $211.68, and was in spite of a -0.7 percentage point decline in room occupancy, which dropped to 79.5 percent.

At $168.35, RevPAR at hotels this month was well behind the punchy performance recorded in March ($180.07) and April ($179.32) as demand slowed from the recent peaks.

Despite the growth in top line performance, hotels recorded a 0.6 percentage point increase in labor costs, which grew to 34.1 percent of total revenue.

As a result of the movement in revenue and costs, flow through at hotels in May was recorded at 51.9 percent, which is reasonable considering the lacklustre TrevPAR increase.

And despite the limited increase this month, year-to-date growth in bottom line performance at hotels remained steady at 3.4 percent for the five months to May 2018, to $103.93.

“Further to the record breaking revenue performance in March and April, the U.S. hotel market is now heading into the slower summer period, as commercial activity lessens.

However, the story remains positive as May was not only the fourth consecutive month of profit growth, but it would have been the eighth month in a row in which hotels had recorded an increase in GOPPAR were it not for the slight slip in January,” said Pablo Alonso, CEO of HotStats.

In line with the growth across the country, hotels in New York City have recorded consistent increases in profit per room in 2018, which were punctuated by a 4.5 percent year-on-year increase this month, to $168.72 per available room.

The 6.2 percent increase in profit per room for year-to-date 2018 is further to the buoyant performance in 2017, during which hotels in the city recorded a 2.8 percent increase in GOPPAR. This was in spite of the addition of more than 5,000 bedrooms to hotel supply.

The growth in profit per room at hotels in New York City this month was driven by increases across all revenue departments, but led by a 2.7 percent increase in RevPAR, as hoteliers continue to drive growth in both room occupancy ( 1.3 percentage points), to a heady 90.2 percent, as well as achieved average room rate, which increased by 1.3 percent year-on-year, to $348.60.

While hotels in New York continue to drive increases in achieved average room rate, more recently the growth in this measure has been led by the leisure segment, as commercial rates in the city continue to come under pressure, illustrated by the drop in rate recorded in the residential conference (-2.0-percent) and corporate (-5.0 percent) segments for year-to-date 2018.

Nevertheless, as a result of growth in the rooms department, as well as increases in non-rooms revenues, including food/beverage ( 7.5 percent) and conference/banqueting ( 10.0 percent) on a per available room basis, TrevPAR at hotels in New York City increased by 4.8 percent this month to $460.88.

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