As expected, March was a brutal month for the global hospitality industry as a result of the COVID-19 pandemic, according to HotStats data, with the U.S., Europe, Asia and Middle East all recording year-over-year profit drops of 100 percent or more.
In the United States, gross operating profit per available room was down 110.6 percent year over year 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 a drop of -10.4 percent 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, according to the company: Revenue per available room for the month was down 64.4 percent, heavily influenced by a 48.8-percentage-point drop in occupancy to 31.5 percent. The presumption is that April occupancy will suffer even more because many hotels were still open in early March.
The decline in RevPAR, combined with a more than 65 percent drop in total food-and-beverage RevPAR, led to a 62.1 percent decrease in total revenue, the greatest decrease since January 2016, when TRevPAR was down 8.2 percent 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, HotStats reported. All undistributed expenses came down, while total labor costs on a per-available-room basis were down 21 percent YOY. However, savings in payroll did not match drops in revenue because many hotels still had to maintain certain levels of staffing despite being closed.
Profit margin for the month turned negative, down 52.8 percentage points to -11.6 percent.
Europe
In Europe, March saw GOPPAR for the month fall a record 115.9 percent, the biggest YOY decline since April 2009, when GOPPAR dropped 37.9 percent in the thick of the Great Recession. 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 percent YOY, the result of a 44.6-percentage-point drop in occupancy, combined with an 11 percent YOY drop in average rate. As all ancillary revenue plummeted, it brought TRevPAR down 61.6 percent, again the largest YOY drop April 2009, when TRevPAR declined 23.5 percent.
The data show that COVID-19 is hitting revenue and profit about three times harder than the global financial crisis and about four times 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 percent YOY on a per-available-room basis.
Total overhead costs were down 25.3 percent YOY.
Profit margin was down 45.7 percentage points to -13.1 percent, the first time HotStats has recorded a negative profit margin for the region.
Asia-Pacific
The good news out of parts of the region is that COVID-19’s advance is slowing. Still, March in the region as a whole was marked by a 117.8 percent decline in GOPPAR, another record drop, besting the record only set a month earlier, when GOPPAR was down 98.9 percent.
After a break-even February in GOPPAR as a value, it turned negative in March at -$11.22.
Following the trend, TRevPAR in the month was down a record 75.3 percent YOY, besting its previous record of -52.5 percent YOY achieved a month earlier. Rooms and F&B revenue declines dragged total revenue down, with the former declining 76.2 percent YOY.
Total overhead costs on a per-available-room basis were down 40 percent YOY.
Profit margin for the month fell into negative territory at -27.4 percent after a narrowly positive margin in February at 0.9 percent.
China continues to suffer negative performance across the breadth of key performance indicators month to month, but there are signs of improvement. Occupancy in March inched up 7.3 percentage points over February, and while GOPPAR was still in the red, it was 64 percent higher in March over February in dollar value.
In Hubei province, where the coronavirus was first detected, occupancy in March was already up to 58.9 percent, only an 11-percentage-point decrease from the same time a year ago. Though much of that occupancy is likely a function of medical workers using the hotels for accommodations, GOPPAR was positive for the month at $22.60, after a negative month of February.
Middle East
Though GOPPAR in the Middle East didn’t turn negative on a dollar basis, it was down 98.4 percent YOY, a record for the region and highest since it was down 74.3 percent YOY in July 2013, a time of civil unrest that included the Egyptian coup.
TRevPAR also was down a record 61.7 percent in the month, the highest YOY negative turn since June 2015, when the metric was down 43.9 percent YOY. RevPAR was down 62.7 percent YOY, led by a 41.5 percentage point drop in occupancy to 34.2 percent.
Expenses followed a similar trajectory as the other regions, dipping YOY, but still taking up a large chunk of revenue, according to HotStats. Labor costs came down 25.8 percent YOY but were up 23.6 percentage points as a percentage of total revenue.
Total overhead costs on a per-available-room basis were down 27 percent YOY.
Profit margin for the month was barely positive at 1.5 percent.
Outlook
As COVID-19 conceivably lessens or peters out in the ensuing weeks and months and hotels reopen, expectations are that hotel performance will pick up from the depths it is in currently. But with demand tied closely to gross domestic product growth and expectations of double-digit drops in the second quarter across the globe, hoteliers will be hard-pressed to generate a modicum of revenue throughout the rest of the year and likely will have to wait until there is a vaccine to see profits normalize.
Source: https://www.hotelmanagement.net/own/hotstats-global-hotel-profit-rocked-by-covid-19