Hotel data reveals: 110% GOPPAR drop in US, profit margins down to -11.6% in March
COVID-19 has hit the hotel industry unlike any other crisis before. (Photo from Unsplash by Anastasiia Chepinska)
As COVID-19 rages on, hotel KPIs show the devastating impact the pandemic has had on the sector, including negative profit margins in March.
COVID-19 hit the hospitality and travel industry hard.
As the pandemic made its way around the world in March and brought global travel close to a standstill, many hotels say year-over-year profits drop by 100% or more, HotStats data recently revealed.
We find out more about how the virus has financially impacted the hotel industry and which regions were hardest hit so far.
United States hotel market hit hard
In the United States, gross operating profit per available room (GOPPAR) dropped by 110.6% YOY to – $12.71, the first time this value was in the red. This was by far the largest decline recorded by HotStats since it began charting U.S. data.
Due to the 48.8% drop in occupancy, revenue per available room (RevPAR) declined by 64.4%. Combined with the drop in F&B revenue, total revenue per available room (TRevPAR) fell by 62.1%. This led the profit margin to go down by 52.8% to -11.6%.
Europe is hit worse than during the 2008/09 financial crisis
HotStats data reveals that in March Europe was hit harder by the COVID-19 crisis than by the global financial crisis in 2009. That month, GOPPAR fell by a record 115.9% YOY and made it this the first month since HotStats began tracking data in Europe in 1996 that GOPPAR turned negative at -€8.33.
Due to a 44.6% drop in average occupancy, RevPAR was down 66.2% YOY while the average rate reduced by 11% YOY. Combined with the loss of ancillary revenue, TRevPAR sank by 61.6% YOY.
The profit margin dropped by 45.7% to a negative of 13.1%, a first in the region since HotStats began recording data.
This data shows that the Coronavirus is impacting hotel revenue and profits three times more than the financial crisis and four times more than September 11, 2001.
Asia-Pacific is down but gives hope
Since markets in Asia were impacted several weeks before the rest of the world, experts are looking to this region for answers to questions about the future.
Despite the pandemic’s spread slowing here, March was still a painful month with a 117.8% YOY decrease in GOPPAR, taking its value to -$11.22 for Asia Pacific. This beats even the record-breaking decrease of 98.9% in February.
TRevPAR sank by 75.3% YOY in March. Again, this is an even steeper drop than the 52.5% YOY decrease in February. This also brought down the profit margin to -27.4% in March after it barely stayed positive at 0.9% in February.
China’s numbers offer some hope though. Even though GOPPAR is still in the red, at least it climbed by 64% in March as people took to travelling again domestically. The influx of medical workers and their use of hotels actually led to a GOPPAR of $22.60 in the province of Hubei.
Impact on the Middle East
Unsurprisingly, the Middle East also suffered a decrease in KPIs. However, GOPPAR did not turn negative here as it was ‘only’ down 98.4% YOY. This is still a record for the region since the last major drop due to civil unrest in 2013.
TRevPAR also dropped by a record 61.7% YOY in March while RevPAR decreased by 62.7% after region-wide occupancy fell to 34.3%. Despite all this, on average, hotels in the Middle East achieved a profit margin of 1.5%.
Looking into the future
With the spread of COVID-19 slowing in many regions, hotels have begun to reopen and welcome guests once again. However, occupancy percentages remain low and will likely stay that way for a while.
Currently, developments in some markets may offer hope, but in terms of revenue and profitability, the near future is still a bleak one for most hoteliers. The development of a vaccine currently looks like the only way to get back to ‘normal’ profits.
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