European hotel profits fall as openings increase competition

Profit per room at hotels in mainland Europe fell by 9 per cent year-on-year in January – the largest margin of decline in this measure since August 2016 – as revenues dropped and costs escalated, according to the latest data from HotStats.

However, conference average room rate in January was up 3.7 per cent year-on-year. Total conference and banqueting revenue exclusive of rooms was up 0.5 per cent in the month.

A glut of new hotel bedrooms throughout Europe seems to have created more competitive pricing.

David Eisen, director of Hotstats hotel intelligence and customer solutions, said: “I’d say that new supply does have an impact on demand, weakening it to some degree. In 2018, more than 53,000 rooms opened throughout Europe, which was reportedly the highest number of new hotel openings ever recorded. This has an impact on occupancy levels.”

January is historically a slow month for hotels in Europe and the dip should not portend gloom for the full year, according to the report. Hotstats says that this is evidenced by mainland Europe’s very successful year of operation in 2018, during which hotels in the region recorded a 9 per cent increase in GOPPAR (total gross operating profit for the period divided by the total available rooms during the period.)

But within the average figures, the story varied throughout Europe with Lisbon, for example, recording a 6.4 per cent decrease in profit per room while Madrid’s total gross operating profit GOPPAR soared by 31 per cent in the month. The growth in profit was led by a 9 per cent increase in average room rate, which hit €151.61 and was a fourth consecutive month of significant growth in rate.