European Chain Hotels Market Review - September 2010

Nov 02, 10 | 1:56 am

Paris achieves highest profitability since credit crunch

Hoteliers in Paris achieved the highest Gross  Operating Profit per Available Room (GOPPAR) for that city since October 2008. This was thanks to massive increases in achieved average room rate across all major market sectors, according to the latest HotStats survey by TRI Hospitality Consulting.

At €116.07 per available room for the month of September 2010, the French capital registered a 52.4% GOPPAR increase against the same month last year. The significant increase in profitability levels was primarily as a result of a return to strong demand from the corporate and conference sector, which collectively accounted for  55% of the market mix last month compared to 38.5% of the mix during the same period last year.

Following major declines in achieved sector rates during the same period last year, hoteliers in the French capital regained and surpassed the levels achieved in September 2008 in the corporate (+22.1%) and conference (+24.5%) sectors. As a result of the growth in sector rates, achieved average room rate in Paris increased by 22% during the month of September, to €216.11, from €177.10.

Most noteworthy was the increase in the nondiscounted rack rate, which grew by approximately €110 in September, due to high levels of accommodation demand driving a room occupancyof 89.2% thanks to a strong calendar of events which attracted approximately 60,000 visitors to Premiere Vision, 23,000 visitors to Mode City and more than 70,000 to Maison & Objet.

During September, hoteliers in Paris successfully added to a strong GOPPAR performance due to a 4.3 percentage point decrease in payroll as a percentage of total revenue, to 31.5%.

"Historically, the Paris hotel market has been a consistently high performer and it is no surprise to see profitability levels increasing throughout 2010, particularly with the return of high-yielding commercial demand. Additionally, hotels in the French capital have successfully avoided any negative impact associated with striking air traffic controllers, the SNCF and RATP," said Jonathan Langston, managing director, TRI Hospitality Consulting.

September signals a return to strong trading for most European markets

Following the mixed performance across Europe during August, September marked a return to strong growth across all headline performance measures for most European cities, according to the latest HotStats survey.

As confidence levels return in some of the major hotel markets across Europe, significant increases in year-on-year GOPPAR performance were notable in major conference cities such as Amsterdam (32.8%), Barcelona (33.5%) and Frankfurt (35.8%) with London once again leading the way with an increase of 18.9% resulting in an achieved GOPPAR of €120.89.

In contrast, despite its profile as a conference destination, Vienna was the only city to suffer a significant decline in GOPPAR performance levels, which was primarily due to a 28% decrease in achieved average room rate. Whilst other European markets suffered major declines in average room rate during the same period last

year, Vienna escaped lightly with a 3.8% decrease. However, roles were reversed this month as GOPPAR in Vienna declined by 31.8% to €52.11, leaving the Austrian capital in the unfamiliar position of being close to the bottom of the pile.

Unfortunately, the accolade of being bottom of the pile was reserved for the long suffering hoteliers in Budapest.

Although the latest HotStats survey revealed that year-to-date GOPPAR levels at hotels in the Hungarian capital are 1.5% above where they were during the same period last year, with Revenue per Available Room (RevPAR) levels remaining static, hoteliers in Budapest have successfully managed payroll levels downwards, to 31.4% of total revenue.

"The over supply within the Budapest hotel market has made life extremely challenging for hoteliers, especially given the current economic climate. Hoteliers in the city have worked hard to grow volume and manage costs during 2010; however, it is difficult to see when the market will begin to show a recovery in average room rate performance" added Langston.

Notes:

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 which operate primarily in the four and five-star sectors.

Please note: The data samples are reviewed and rebased each year to reflect the changes in the HotStats survey base.

As a result, performance ratios published last year may differ from those contained within this report.
TRI Hospitality Consulting provides a wide range of services to clients in the hotel sector.

TRI has offices in London, Dubai and Madrid.