Covid-19 hitting European hotel revenue and profit ‘three times harder than the financial crisis’

The impact of the Covid-19 outbreak in Europe has hit hotel revenue and profit approximately three times harder than the global financial crisis and four times harder than 9/11, according to HotStats.

While February data was unremarkable, March saw gross operating profit per available room (goppar) fall a record 115.9%, the biggest year-on-year decline since April 2009, when goppar dropped 37.9% in the thick of the global financial crisis. It was the first time since HotStats began tracking monthly European data in October 1996 that goppar as a value turned negative at -€8.33.

Revenue per available room (revpar) was down 66.2% year-on-year, the result of a 44.6 percentage-point drop in occupancy, combined with an 11% year-on-year drop in average rate. As all ancillary revenue plummeted, it brought total revenue per available room (trevpar) down 61.6%, again the largest year-on-year drop in the KPI since April 2009, when trevpar declined 23.5%.

Sinking revenue was accompanied by double-digit expense drops, the product of hotel closures, scaled-back operations and lighter staffing. Labour costs were down 28.8% year-on-year on a per-available-room basis.

Total overhead costs were down 25.3% year-on-year and profit margin was down 45.7 percentage points to -13.1%, the first time HotStats has recorded a negative profit margin for the region.

The report said that while expectations are that hotel performance will pick up, with demand tied closely to GDP growth and expectations of double-digit drops in the second quarter across the globe, hoteliers will be hard-pressed to generate a modicum of revenue throughout the rest of the year and will likely have to wait until there is a vaccine to see profits normalise.

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