Market Report Middle East

MENA Chain Hotels Market Review - June 2018

Falling Non-Rooms Revenues, as well as rising costs, contributed to the -2.3% decline in GOPPAR at hotels in the Middle East & Africa in June, which was also in spite of a +1.4% year-on-year increase in RevPAR, according to the latest worldwide poll of full-service hotels from HotStats.
Dubai skyline at night
RevPAR Up But Profit Down at Hotels in the Middle East & Africa

HotStats

Falling Non-Rooms Revenues, as well as rising costs, contributed to the -2.3% decline in GOPPAR at hotels in the Middle East & Africa in June, which was also in spite of a +1.4% year-on-year increase in RevPAR, according to the latest worldwide poll of full-service hotels from HotStats.

Hotels in the Middle East & Africa continued to suffer from the challenges borne out of the decline in the oil and gas industry this month, as profit levels dropped to their lowest level in 2018, at just $44.89, which was more than $40 below the year-to-date GOPPAR level of $76.41.

And whilst hotels in the region worked hard to record a +1.4% increase in Rooms Revenue, this was entirely wiped out by falling revenues across Non-Rooms departments, including Food & Beverage (-3.5%) and Conference & Banqueting (-7.3%) on a per available room basis.

As a result, Total Revenue at hotels in the Middle East & Africa fell by -0.5% in June, to $163.68 on a per available room basis, which was the lowest TrevPAR recorded in the region since July 2017 and was almost $40 below the year-to-date figure, at $201.04.

Hotels in the region have been forced to cut costs due to the continued decline in revenues, which this month included a -0.4-percentage point saving in Payroll, which dropped to 33.3% of total revenue.

However, this positive shift was cancelled out by a +1.3-percentage points uplift in Overheads, as growth was recorded in key expenses, including Admin & General, Marketing and Property Maintenance.

As a result of the movement in revenue and costs this month, profit per room in the region fell for the third consecutive month, with profit conversion recorded at just 27.4% of total revenue, well behind the figure for year-to-date 2018, at 38.0%.

Profit & Loss Key Performance Indicators – Middle East & Africa (in USD)

June 2018 v June 2017

RevPAR: +1.4% to $93.14

TrevPAR: -0.5% to $163.68

Payroll: -0.4 pts to 33.3%

GOPPAR: -2.3% to $44.89

The increase in RevPAR at hotels in the Middle East & Africa was in spite of an -11.0% year-on-year decline in achieved average room rate in the region, which dropped by more than -$20 to $174.90 from $196.54 during the same period in 2017.

In contrast, room occupancy in the region increased by +6.6-percentage points, although remained low at 53.3%. Whilst average room occupancy was well ahead of the same period in 2017, it was at the lowest level recorded in 2018 and -13.4-percentage points below the year-to-date average, at 66.7%.

“The challenging performance is unsurprising at this time of year due to Ramadan, a general reduction in visitor numbers to the region due to the stifling heat and slowing in commercial activity.

However, the ongoing decline in achieved average room rate will be of serious concern to hotel owners and operators as it has been broadly following this negative trajectory for almost three years and is having a serious impact across the entire hotel profit and loss account,” said Pablo Alonso, CEO of HotStats.

In line with the performance of the wider region, hotels in Abu Dhabi suffered a drop in TrevPAR in June, as declines in Non-Rooms Revenues cancelled out the increase in Rooms Revenue.

However, in contrast to the Middle East & Africa, cost savings were sufficient to drive an increase in profit per room, albeit with GOPPAR remaining in negative territory, at -$5.19 for the month.

Hotels in Abu Dhabi recorded a +3.5% increase in RevPAR in June, which was in spite of a -2.7% decline in achieved average room rate, to $97.49, as room occupancy grew by +3.2-percentage points year-on-year to 53.8%.

That said, at just $52.45, RevPAR at hotels in Abu Dhabi was one of the lowest recorded in the city in recent years, second only to June 2017, when it hit a low of $50.68, further illustrating the operational challenges typically faced by hotels in the region, including the United Arab Emirates, this month.

Hotels in Abu Dhabi faced further woe as the increase in Rooms Revenue was cancelled out by declines across Non-Rooms departments, which included Food & Beverage (-5.2%) and Leisure (-22.7%) and as a result, TrevPAR fell by -0.6% to $110.45.

Profit & Loss Key Performance Indicators – Abu Dhabi (in USD)

June 2018 v June 2017

RevPAR: +3.5% to $52.45

TrevPAR: -0.6% to $110.45

Payroll: -1.0 pts to 48.8%

GOPPAR: +6.5% to -$5.19

However, cost savings which included a -1.0-percentage point drop in Payroll, which remained high at 48.8% of total revenue, were enough for hotels in the capital of the UAE to record a +6.5% increase in GOPPAR. And whilst profit per room remained in the red, it will be seen as relatively positive news in a fairly desperate month of trading.

Elsewhere in the UAE, hotels in Dubai recorded a +230.1% year-on-year growth in profit per room, which is a staggering increase, but was from a very low base, at just $1.93, and represented an uplift of just $4.83.

Profit & Loss Key Performance Indicators – Dubai (in USD)

June 2018 v June 2017

RevPAR: +6.0% to $83.13

TrevPAR: +2.4% to $172.91

Payroll: -2.2 pts to 43.5%

GOPPAR: +230.1% to $6.76

The growth in GOPAR at hotels in Dubai was on the back of a fairly average uplift across all other measures, which included an increase in Rooms Revenue (+5.9%) and Non-Rooms Revenue, which contributed to the +2.4% year-on-year increase in TrevPAR, to $172.91.

In addition to the uplift in revenues, the -2.2-percentage point saving in Payroll, to 43.5% of total revenue, helped put a particularly positive spin on the profit growth for the month.

“Whilst the triple-digit profit growth for Dubai hoteliers this month looks extremely positive, the movement as a quantum was very slight. Furthermore, it has unfortunately done very little to improve the overall profit picture in the UAE city for the year so far as GOPPAR levels for H1 2018 remain almost 9.0% below the same period in 2017,” added Pablo.

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