Profit slide continues for Middle East & North Africa hotels

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Waning revenues and rising costs have conspired to hobble profit per room at hotels in the Middle East & North Africa, as GOPPAR in the region has slid by almost 40 percent over the last 36 months, according to the latest data tracking full-service hotels from HotStats.

Bucking the month-to-month downward trend, however, GOPPAR in October, at $77.16, was 104 percent higher than the previous month, but still an 8.1-percent year-over-year decline. Hotels in the region have now recorded a YOY decline in profit in seven of the last 10 months.

The decline this month was led by a 3.8-percent drop in RevPAR, the byproduct of a 5.2-percent decline in average room rate. Further declines were recorded across non-rooms departments, including food & beverage, down 3.7 percent on a per-available-room basis. TRevPAR for the month declined 4 percent to $205.09.

Profit & Loss Key Performance Indicators โ€“ Middle East & North Africa (in USD)

October 2018 v. October 2017

RevPAR: -3.8% to $120.25
TRevPAR: -4.0% to $205.09
Payroll: +0.9 pts. to 26.7%
GOPPAR: -8.1% to $77.16

The drop in revenue was further exacerbated by rising costs, which included a 0.9-percentage-point increase in payroll to 26.7 percent of total revenue, as well as a 0.9-percentage-point increase in overheads, which grew to 26.3 percent of total revenue.

As a result of the movement in revenue and costs, profit conversion at hotels was recorded at 37.6 percent of total revenue in October.

โ€œAs the market returned to a more commercial-led mix, hotels in the Middle East & North Africa would have expected some positive news following a pretty torrid period of trading during the summer; however, this did not transpire,โ€ said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats.

In contrast to the wider Middle East & North Africa market, hotels in Egypt performed well, led by Cairo, where hotels recorded a 24.1-percent YOY increase in profit per room to $54.95 for the month. This represented the seventh month of the year in which hotels in the city recorded a YOY increase in GOPPAR.

In addition to a 22-percent increase in rooms revenue, the significant uplift in volume helped hotels in Cairo record strong growth in non-rooms departments, including food & beverage (up 25.2 percent) and conference & banqueting (up 23.2 percent), on a per-available-room basis.

As a result of the movement across all revenue centers, TRevPAR increased by 21.1 percent YOY to $106.36. This was further buoyed by a YOY drop in payroll, which fell by 1.5 percentage points to 15.8 percent of total revenue.
Profit conversion at hotels in Cairo soared to a lofty 51.7 percent of total revenue.

โ€œEgypt is currently bucking the negative trend faced by hoteliers across much of the rest of the Middle East & North Africa, which is being led by robust economic growth forecast at 5 percent for 2018, with greater increases anticipated in 2019 and 2020,โ€ said Grove. โ€œAfter challenges in 2011, reform momentum is being sustained and the positive economic news will be welcomed by owners and operators.โ€

Profit & Loss Key Performance Indicators โ€“ Cairo (in USD)

October 2018 v. October 2017

RevPAR: +22.0% to $64.71
TRevPAR: +21.1% to $106.36
Payroll: -1.5 pts. to 15.8%
GOPPAR: +24.2% to $54.95

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Chief Assignment editor is Oleg Siziakov

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