Profit Continues to Plummet at Paris Hotels Despite Hosting Euro Championships
As a result of a 16.7 percentage point year-on-year drop in occupancy and an 11.5% decline in achieved average room rate, RevPAR at hotels in Paris fell by 27.8% this month, which was in spite of the French capital hosting 12 fixtures and being the hub of the 2016 UEFA European Championships.
In the wake of the terrorism attacks in November 2015, Paris hotels have struggled to hold on to plummeting occupancy levels, and the drop in volume has meant that hotels have been unable to effectively yield average room rate during periods of peak volume, illustrated by the 23.4% decline in the rate achieved in the Best Available Rate segment in June and the 16.4% drop in this measure for H1 2016.
Whilst, in the first six months of the year, hotels in Paris have been able to successfully cut overheads (-4.1%), the extent to which labour costs can be reduced is limited by French employment regulations and as a result, in H1 2016 payroll as a percentage of total revenue has increased by 5.8 percentage points to 48.6%.
Further to the movement in revenue and costs, year-to-date profit per room at Paris hotels plummeted by 44.4% to €51.95, equivalent to a profit conversion of just 16.6% of total revenue in H1 2016 from 25.3% during the same period in 2015.
Profit Levels at Milan Hotels Realigning After Bumper Expo Year
Profit per room at hotels in Milan fell by 38.3% this month as top and bottom line performance fell back towards historic levels following the huge boost in 2015 as a result of the city hosting the Expo Milano, according to the latest data from HotStats.
Milan Expo attracted over 20 million visitors from more than 150 participant countries with approximately 5,000 events hosted over 184 days. Whilst the Expo opened in May 2015, June was the first month of significant realignment of key performance metrics, with RevPAR (Revenue per Available Room) dropping by approximately 28.0%, equivalent to €50.00. This is in contrast to the €42.85 increase in June 2015.
Whilst hotels in the city were able to maintain strong room occupancy levels this month, at 85.5%, average room rate plummeted by 24.8% to €151.48 as the reduction in demand limited the opportunity of hotels to drive premium rates.
Cost savings in both labour (-8.8%) and overheads (-5.0%) were not sufficient to offset the considerable decline in revenue and as a result, profit per room at hotels in Milan dropped to €59.99 from €97.30 during the same period in 2015. This is equivalent to a decline in profit conversion of 9.2 percentage points to 31.5% of total revenue.
Profit Growth at Moscow Hotels Accelerates as Russia Moves Out of Recession
Hotels in Moscow recorded a 10.2% increase in profit per room in June, which contributed to the 18.3% year-to-date increase in this measure, as Russia emerged out of recession in early 2016.
Whilst hotels in Moscow halted the downward trajectory in performance in mid-2015 and year-to-date 2016 have recorded an 11.4% increase in RevPAR, the return to top line growth in H1 2016 has been somewhat assisted by an increasing reliance on demand from online travel agents, such as booking.com and expedia, illustrated by the 19.8% year-on-year increase in Rooms Cost of Sales.
In addition to growth in Rooms revenue, hotels in Moscow have successfully recorded year-to-date increases in revenue in the Food and Beverage (+12.3%) and Conference and Banqueting (+12.9%) departments on a per available room basis.
As a result, year-to-date 2016 TrevPAR (Total Revenue per Available Room) growth has been recorded at 12.2% and despite cost increases, profit conversion at Moscow hotels for H1 2016 was recorded at 39.8% of total revenue from 37.8% during the same period in 2015.
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