Beware the ides of March. But for the global hotel industry, the month was anything but a tragedy.
First-quarter hotel performance ended strong with March profit surging across most global regions, a sign of stronger revenues, better conversion rates and new worries over a COVID upsurge not discouraging would-be travelers.
European GOPPAR hit $38.09, the highest the number has reached since it peaked in October 2021, though still around $12.72 lower than March 2019. After GOPPAR dropped into negative territory in January, it’s now up 229% YTD compared to the same time in 2021.
Feeding into the increase in GOPPAR was a concurrent lift in both RevPAR and TRevPAR, with both metrics up high triple-digit percentages in March versus the same month last year. Though occupancies crept up, it was average daily rate that boosted hotelier fortunes. ADR across Europe was at its highest level since September 2019, with March ADR $26.48 higher than at the same time in 2019.
On the other side of the ledger, expenses saw a bit of a reduction in March, but overall costs are proving recalcitrant. Total labor on a per-available-room basis was still below 2019 levels but up significantly YTD since last year—143%. At the same, other departmental costs are not abating, including utilities, which, at $7.94 on a PAR basis, were up 107% in Q1 versus the same time last year. They are also significantly higher than at any time pre-pandemic.
The U.S. saw a similar uptick in its operating fortunes. GOPPAR in March was up some $70 over January and at $90 was closing in on March 2019’s level. It was the highest profit month in the U.S. since February 2020, the last normalized month of performance before COVID-19 reframed the world.
Much of the trends in the U.S. followed Europe, with ADR growth leading the way in the recovery. March ADR on a nominal basis was at its highest level since October 2018.
Operators managed to convert much of the revenue bounce into profit, evidenced by a flow-through rate (defined as the percentage of incremental profit that flows to the bottom line from each incremental dollar of top-line revenue) of more than 50% in the month. Although labor costs are moving upward month to month, they aren’t moving at a rate higher than the increases in total revenue.
Though corporate business continues to stay muted, association and convention volume increased in March and was at its highest rate since March 2020.
Middle East march up
Expo 2020 concluded in March and proved to continue to underpin operating performance in the Middle East region. In fact, March GOPPAR of $114.33 marked the highest-performing month for the metric in the Middle East since before 2018 and 41% higher than in 2021—an astonishing feat.
TRevPAR was at its highest point since April 2018, bolstered by a boost in F&B revenue, which hit $71.87 on a PAR basis. F&B revenue could continue its upward momentum, especially since places like Dubai have relaxed their food and beverage rules during the month of Ramadan, April 1-May 1. Ramadan curtains were made optional by Dubai’s Department of Economy and Tourism (DET), which stated: “For Ramadan, restaurants in the emirate [Dubai] can choose whether or not to place curtains to cover their facades for serving food during fasting hours in line with last year’s guidelines.”
DET also announced that venues can serve food and drinks within authorized working hours without the need for pre-authorization or permits. In previous years, F&B outlets were closed until the fast was broken at sunset.
China did not have a similar fortune enjoyed by many other regions, as COVID lockdowns reemerged, dragging hospitality down with it. Shanghai has been in lockdown for about a month now while a COVID spike in Beijing is prompting city officials to act to contain it.
March was a grim month for China’s hotels, with GOPPAR moving into negative territory for the first time since February 2020, around when the pandemic began.
As GOPPAR dwindled to -$3.83, payroll costs dove with it, signaling a cut back in the workforce. Total payroll on a PAR basis fell to $28, the lowest it’s been since July 2020.