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Profit Levels Fall As USA Hotels Hit Stormy Period Of Trading

Wednesday, October 25, 2017
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Hotels in the USA recorded a 5.9-percent decline in profit per room this month as trading for much of the South and South East region was 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 hotels in the USA this month, 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, hotels in the USA 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.

Profit & Loss Key Performance Indicators – USA (in USD)
September 2017 v September 2016
RevPAR: -2.1% to $157.49
TrevPAR: -3.2% to $242.93
Payroll: 2.6 pts to 35.5%
GOPPAR: -5.9% 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 USA fell by 5.9-percent to $89.97, equivalent to a profit conversion of 37.0-percent.

Whilst hotels in the USA 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.
Hotels in Miami were amongst the worst hit in the South East region of the USA by the hurricane activity in September, 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 undoubtedly limited the 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 v September 2016
RevPAR: -19.2% to $89.33
TrevPAR: -28.7% to $128.45
Payroll: 7.8 pts to 44.6%
GOPPAR: -60.6% 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.

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,” said Pablo Alonso, CEO of HotStats.
Whilst 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, by far the lowest this measure has been recorded in recent years.

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.

However, this month, 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.

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’,” added Pablo.

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

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