European Chain Hotels Market Review – March 2010

Barcelona enjoyed a staggering 170% increase in Gross Operating Profit Per Available Room (GOPPAR) in the month of March, according to the latest figures from TRI Hospitality's HotStats. This was thanks to a revenue uplift and a tight control over costs, including a reduction of 9.8% in payroll.

However, at €25.62, Barcelona is still amongst the lowest performing markets of the 10 cities surveyed, with only Prague and Budapest achieving lower GOPPAR.

In March 2010, a report from the Spanish Ministry of Transport indicated that passenger traffic at Barcelona Airport increased by 9% compared to March 2009, partly due to the new terminal that opened towards the end of 2009, inducing several airlines to introduce new flights. As a result of growth in room occupancy and average room rate, the Barcelona hotel market experienced 30.2% growth in Revenue per Available Room (RevPAR) and 31.7% growth in Total Revenue per Available Room (TrevPAR) in the month of March 2010.

According to Jonathan Langston, managing director, TRI Hospitality Consulting: “As markets start to recover, the gearing effect of fixed costs which resulted in severe declines in GOPPAR last year is now starting to work in the favour of hoteliers. With the exception of Brussels, all markets surveyed experienced a greater increase in GOPPAR relative to TrevPAR.”

Budapest and Prague continue to struggle

After achieving a growth in profitability in February, performance levels in the Budapest hotel market declined again in March 2010 relative to March 2009. Although the market experienced an increase of 3.6 percentage points in room occupancy levels, average room rate declined by 20%, resulting in a decline of 14.7% in RevPAR and 35.6% in GOPPAR.

This is in line with the GOPPAR decline of 36.6% experienced by the market in the 12 months to March 2010. The sustained decline in profitability levels has resulted in the Hotel Association of Hungary to call for a decrease in VAT for hotel accommodation to 10%, the reinstatement of taxfree holiday vouchers in the country to promote domestic tourism and an increase in the budget of the Hungarian Tourist Board (Magyar Turizmus). The hotel association also highlighted the need for a major congress centre in Budapest and the establishment of a national convention bureau.

Prague fared worse than Budapest and experienced declines in both room occupancy and average room rate in March, resulting in a 23.9% decline in RevPAR. GOPPAR declined by 41.1%, higher than the decline of 30.9% experienced in the 12 months to March 2010. The continued woes of hoteliers in Prague have meant that the city has become a bargain destination for international travellers and in April, the City Costs Barometer, an annual study by The Post Office, named Prague as the best-value destination for a cultural break this spring. The city is now 38% cheaper for British visitors than last year despite sterling losing 7% of its value against the koruna between March 2009 and March 2010.

.

London leads on profitability

In the calendar year to March 2010, Paris achieved an average room rate of €166.15, a premium of 8.7% on the London hotel market. However, at 79.3%, London outshone its French counterpart with a premium of 10.8 percentage points on room occupancy. Although both cities achieved similar levels of TrevPAR, London achieved a significant premium of 78.6% in GOPPAR. “London’s strong RevPAR performance coupled with the ability of British hoteliers to effectively control cost levels means that London remains the most profitable city in Europe in which to operate a hotel” said Langston.

With most European economies now experiencing modest levels of growth, eight out of the ten cities surveyed experienced increases in GOPPAR in the calendar year to March 2010. With the exception of Barcelona, Amsterdam was one of the biggest movers, achieving a GOPPAR increase of 32.5%. Brussels remains one of the least profitable markets in western Europe, achieving a GOPPAR of €26.10 in the calendar year to March 2010, but still posting an increase of 8% over the performance of the market over the same period in 2009.

Contact

Jonathan Langston
Phone: +44 (0)20 7486 5191
Email: jonathan.langston@trihc.com

Organization

TRI Hospitality Consulting
www.trihc.com
88 Baker Street
London, W1U 6TQ
United Kingdom
Phone: +44 (0) 207 486 5191
Fax: +44 (0) 207 486 1189
Email: info@trihc.com