Growth in Profitability Throughout Europe - Europe Chain Hotels Market Review - February 2010
Growth in room occupancy was the catalyst for an increase in profitability for all but one of Europes key city hotel markets, according to the latest HotStats survey from TRI Hospitality Consulting.
It was a more positive outlook across Europe following the mixed performances in January. The recently stalwart Warsaw was the only city surveyed not to experience a growth in profitability in February. But it is those cities which experienced massive losses in February 2009 which have rebounded this month. Movement for the 12 months to the end of February remains depressingly negative and it could be a while before these figures turns positive.
Average room rates remain a challenge for cities in Europe, with only Berlin (+2%), London (+4.7%) and Munich (+8.5%) experiencing a growth. The growth for London leaves the UK capital at the top of the pile again in February 2010, at an average room rate of €154.41, ahead of Berlin, at €150.76.
“Growth in room occupancy and room rate once again provides London with the accolade of being the most profitable city of Europe’s key hotel markets. This month the UK capital was way ahead of the pack achieving a gross operating profit per available room almost double its closest comparable,” said David Bailey, deputy managing director, TRI Hospitality Consulting.
Budapest welcomes GOPPAR growth
For the first time since December 2008, Budapest hoteliers achieved a growth in profitability, according to the latest HotStats survey.
The growth in Gross Operating Profit per Available Room (GOPPAR) was achieved in spite of a 17.1% decline in average room rate, to €80.34 from €96.88 in February 2009. The 2.3% increase in Revenue per Available Room (RevPAR) which precipitated the increase in profitability was entirely due to a 9.6 percentage point increase in room occupancy levels, which still remain at a lowly 50.4%.
However, GOPPAR for the month of February in Budapest, at €6.25, remains at 25% of the average achieved in the last 12 months, at €25.20, leaving the city with some work to do to ensure consistent growth during the year.
Trade fairs fuel strong performance in Munich
With an 89.3% increase in profitability in the month of February, Munich had, by far, the most improved performance, with an uplift in Gross Operating Profit per Available Room (GOPPAR) to €43.60 from €23.03.
The positive movement in GOPPAR was primarily driven by a growth in Revenue per Available Room (RevPAR) in the city of more than 30 per cent, as a result of a 12.3 percentage point increase in room occupancy and an 8.3% uplift in average room rate, to €89.01.
February is typically a busy month for Munich with the annual Munich Security Conference and events at the Messe München International, volume for which was considerably reduced in 2009 due to the economic climate and bitter winter weather.
However, in February 2010, record breaking attendance at a number of major annual trade fairs in the city was responsible for growth across all key performance indicators. An increase in attendance was particularly notable at ‘inhorgenta’ (up 15%) which attracted 30,000 industry professionals, ‘ispo’ event which witnessed an increase of 7% to more than 64,000 international visitors and a record 65,000 attendees at the International Motorcycle Exhibition.
"In February 2009 Germany was at its deepest point in the country’s economic downturn and spending was the last thing on anybody’s mind. However, since the Eurozone exited the recession in the third quarter of 2009, consumer confidence in both the leisure and corporate sectors has returned and this can only be good news for those cities with the ability to host major events and exhibitions; and their hoteliers. Such peaks in demand driven by major events will confer on hoteliers the ability to sell bedrooms at rack rate prices which will obviously reflect favourably on rooms revenue,” added Bailey.
The significant improvement in GOPPAR performance in Munich was also assisted by the 6.7% decrease in the level of payroll as a percentage of total revenue this month, down to 33.1% from 39.9% in 2009. However, this benefit is clearly as a result of efficiencies implemented throughout the course of the last 12 months rather than a radical reduction in personnel during February 2010.
TRI Hospitality Consulting provides a wide range of services to clients in the hotel sector. It has offices in London, Dubai and Madrid.
For more information contact:
Jonathan Langston, managing director 020 7892 2201
David Bailey, deputy managing director 020 7892 2202
Charles Scudamore, director 0207 892 2211
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