HotStats’ latest Middle East and Africa hotel insights report

HotStats’ latest Middle East and Africa hotel insights report

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HotStats' latest Middle East and Africa hotel insights report

Kuwaiti skyline

It’s been tough sledding for hotels in the Middle East & North Africa. February marked the sixth consecutive month of year-over-year profit decline, in spite of a slight rise in RevPAR, according to the latest data tracking full-service hotels from HotStats.

GOPPAR (Total Gross Operating Profit) for the month declined 4.3-percent YOY and two months into 2019, profit levels in the region are already 9.6 percent behind the same period in 2018. The decline in profit was led by a 1.6-percent decrease in non-rooms revenue, which fell to $89.33, equivalent to 42.2 percent of total revenue. However, it was not a blanket decline in ancillary revenues, as YOY growth of 1.1 percent was recorded in the F&B department, on a per-available-room basis.

And while RevPAR for the month was up 0.5 percent (growing to $122.39, 8.0-percent higher than the average for the rolling 12 months to February 2019), TRevPAR suffered a 0.4-percent decline. Growth in room revenue was driven by a 2.6-percentage-point increase in occupancy to 73.9 percent, which was one of the highest room occupancies recorded in the region in the last 12 months. Average room rate was down 3.1 percent YOY. Rising costs evaporated marginal revenue growth. These were led by a 0.6-percent jump in total hotel labor costs and a 2.1-percent increase in total overheads, on a per-available-room basis.

Profit & Loss Key Performance Indicators – Middle East & North Africa (USD)

February 2019 v. February 2018

RevPAR: +0.5% to $122.39

TRevPAR: -0.4% to $211.72

Payroll % of Total Revenue: +0.3 pts. to 28.1%

GOPPAR: -4.3% to $79.45

Profit margin in the region was 37.5 percent of total revenue, marking the sixth consecutive month of profit conversion erosion. “MENA hotels are unfortunately part of a broader trend where flagging revenue is being gobbled up by rising costs, leading to profit decay,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “In a slowing economic climate, hoteliers will need to figure out canny ways to cut down on expense in order to deliver on the bottom line.”

Following the 2015 downing of a Russian passenger plane carrying 224 passengers from Sharm El Sheikh International Airport, a number of European countries and Russia suspended direct flights to the Egyptian resort town. More than three years later, a ban on flights from the UK still remains, but Russia has now lifted its own ban and tourism throughout the region is getting healthier. A report by the Arabian Travel Market noted that the yearly number of visitors to Egypt is expected to increase by 50 percent over the next three years.

Sharm El Sheikh Hotels are slowly benefitting. A profit increase in February marks the sixth consecutive month of growth in this measure and, over the last 28 months, YOY GOPPAR has fallen only twice.

Profit & Loss Key Performance Indicators – Sharm El Sheikh (USD)

February 2019 v. February 2018

RevPAR: +144.8% to $28.05

TRevPAR: +121.0% to $43.86

Payroll % of Total Revenue: -18.0 pts. to 28.6%

GOPPAR: +472.3% to $9.83

Performance of hotels in Kuwait City was more reflective of the challenges across MENA, with profit per room falling by 41.3 percent YOY to $92.70, as the city continues to be hit by declining revenue levels and rising costs. As a result of falling room occupancy (down 9.1 percentage points), achieved average room rate (down 14.6 percent) and non-rooms revenues (down 23.9 percent), TRevPAR decreased by more than $75 YOY to $229.27.

On the cost side, while hotel labor costs on a per-available-room basis were down 8.4 percent YOY, as a percentage of total revenue, they were up 5.4 percentage points, illustrating revenue corrosion. Profit conversion was at 40.4 percent of total revenue, down 11.2 percentage points over the same time prior.

Profit & Loss Key Performance Indicators – Kuwait City (USD)

February 2019 v. February 2018

RevPAR: -26.1% to $123.83

TRevPAR: -25.1% to $229.27

Payroll % of Total Revenue: +5.4 pts. to 29.4%

GOPPAR: -41.3% to $92.70

 

About HotStats

The hotels profiled in this report are drawn from the HotStats database and reflect the portfolios and distribution of the hotel chains that we survey and operate in the full-service sector. Our unique profit and loss benchmarking service enable monthly comparison of hotels’ performance against a competitive set. It is distinguished by the fact that it provides in excess of 100 performance metrics covering 70 hotel performance, revenue, cost and profit statistics providing the deepest insight available into hotel operations.

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