Expert Analysis: MENA hotels review- February 2017

TRI Consulting's Chris Hewett updates us on the latest figured

Chris Hewett, associate director, TRI Consulting
Chris Hewett, associate director, TRI Consulting

ABU DHABI

A 7.7% increase in total revenue was converted to a 29.4% increase in profit per room at hotels in Abu Dhabi this month as hoteliers successfully slashed costs.

It was a mixed performance for hotels in the capital of the UAE, as, despite a 22.4% increase in RevPAR (Revenue per Available Room), declining non-rooms revenues, including food and beverage (-9.4%) and conference and banqueting (-11.3%) pulled TrevPAR (Total Revenue per Available Room) down to a year-on-year increase of just 7.7%, to US $237.09.

However, thanks to cost cutting, which included a 3.4 percentage point reduction in payroll, to 27.1% of total revenue, hotels in Abu Dhabi were able to drive a 29.4% increase in profit per room, to $92.64. Whilst hotels in the city were also able to drive a significant increase in profit conversion, to 39.1% of total revenue from 32.5% during the same period in 2016, the 6.5 percentage points reduction in non-rooms revenue as a proportion of total revenue suggests that potential revenue generating opportunities are being missed by hotels in Abu Dhabi.

DOHA

Hotels in Doha recorded a 20.4% year-on-year decline in profit per room this month, which contributed to the 24% drop in this measure for the 12 months to February 2017.

As Qatar continues to face economic challenges, which are primarily associated with the recent oil crisis, hotels in its capital are struggling to slow the downward trajectory in top and bottom line hotel performance.

This month, in addition to the 6.9% drop in rooms revenue at hotels in Doha, falling year-on-year revenues across all non-rooms departments, including food and beverage (-11.6%) and conference and banqueting (-19.1%), led to a 9.8% TrevPAR decline for month to $313.31.

Profit performance at hotels in the Qatari capital has been on a relatively consistent decline since mid-2015 when the impact of declining oil prices started to bite.

As a result, on a rolling 12-month basis, profit per room has dropped by 34.3% over the last two years, to $100.72 in the 12 months to February 2017. 

SHARM EL SHEIKH

Although hotels in Sharm El Sheikh successfully recorded a 57% year-on-year increase in total revenue in February, profit per room remained in negative territory at -$1.33 for the month. Whilst hotels in the Egyptian resort began to claw back top and bottom line revenues in October 2016 following more than a year of decline, at just 36.8% in the 12 months to February 2017, room occupancy remains well below historic levels.

However, the recovery appears to be well underway, with hotels in Sharm El Sheikh recording a 112% increase in RevPAR for year-to-date 2017, as a result of an 8.7 percentage point increase in room occupancy combined with a 61.5% increase in achieved average room rate, to $34.84. Whilst RevPAR at hotels in Sharm El Sheikh remains very low compared to other MENA cities at just $11.06 in the 12 months to February 2017, the growth in commercial volume, as well as achieved average room rate in both the corporate (+58.2%) and residential conference (+57.1%) segments in February has helped the market to recover some ground. Despite the significant growth in top line performance in February, profit per room at hotels in Sharm El Sheikh was completely wiped out by high costs, including payroll, at 39.7% of total revenue and overheads, at 56.2% of total revenue. As a result, profit per room at hotels in the Egyptian resort fell by 49.4% year-on-year to just -$1.33.

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