LONDON—In the first analysis of full profit-and-loss performance since the COVID-19 pandemic swept through the global hospitality industry, March was expectedly a brutal month, with the U.S., Europe, Asia and Middle East all recording year-over-year profit drops of 100% or more, according to HotStats data, as the virus’ spread continued unabated, all but shutting down travel.
To date, there are more than 2.7 million cases of COVID-19 globally, a third of which are in the U.S., where hotel performance predictably nosedived in March, after a mostly banal February.
Gross operating profit per available room (GOPPAR) was down 110.6% YOY to $-12.71. The triple-digit drop was by far the largest percentage decline ever recorded by HotStats since it started charting U.S. data. The previous high was -10.4% in March 2015. March 2020 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 mammoth 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.
As the top line dried up, expenses in March receded, too, on a per-available-room basis, but still ate into the already attenuated revenue. All undistributed expenses came down, while total labor costs on a per-available-room basis were down 21% YOY. However, savings in payroll did not match drops in revenue, since many hotels still had to maintain certain levels of staffing, even amid shuttered hotels.
Profit margin for the month turned negative, down 52.8 percentage points to -11.6%.
Europe Profit Drop Greater Than GFC
Performance in Europe inevitably nosedived, too. While February data was unremarkable, March saw GOPPAR for the month fall a record 115.9%, the biggest YOY decline since April 2009, when GOPPAR dropped 37.9% in the thick of the Global Financial Crisis. It was the first time since HotStats began tracking monthly European data in October 1996 that GOPPAR as a value turned negative at -€8.33.
RevPAR was down 66.2% YOY, the result of a 44.6-percentage-point drop in occupancy, combined with an 11% YOY drop in average rate. As all ancillary revenue plummeted, it brought TRevPAR down 61.6%, again the largest YOY drop in the KPI since April 2009, when TRevPAR declined 23.5%.
The data show that COVID-19 is hitting revenue and profit ~3x harder than the Global Financial Crisis and ~4x harder than 9/11.
Sinking revenue was accompanied by double-digit expense drops, the product of hotel closures, scaled-back operations and lighter staffing. Labor costs were down 28.8% YOY on a per-available-room basis.
Total overhead costs were down 25.3% YOY.
Profit margin was down 45.7 percentage points to -13.1%, the first time HotStats has recorded a negative profit margin for the region.