Middle East hotels see profit drop to new low in July 2018

The GOPPAR dipped to US $34.70 according to HotStats

Dubai, UAE.
Dubai, UAE.

Gross operating profit per available room (GOPPAR), a key performance indicator, has dropped to a new low of US$34.70 for Middle East & Africa full-service hotels according to a worldwide poll by HotStats.

This was the fourth month in a row in which year-on-year profit levels at hotels in the region have fallen following a comparatively positive Q1, 2018, the report said.

In June, while hotels in the region registered a 1.6% increase in revenue per available room (RevPAR) to $86.55 but the drop in non-room revenues led to the fall of GOPPAR the following month.

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Non-rooms revenues accounted for 42.5% of all revenues this July and despite recording a drop of 0.9% in F&B revenue and conference & banqueting revenue fell by 6.3% on a per available room basis, the total revenue per available room (TrevPAR) at hotels in the region increased by 0.5% to $150.46.

However, rising costs, which included a 0.6-percentage-point increase in payroll to 35.2% of total revenue, as well as a 0.6-percentage-point uplift in overheads to 34.4% of total revenue, cancelled out the growth in total revenue.

As a result of the movement in revenue and costs this month, profit conversion at hotels in the Middle East & Africa was recorded at just 23.1% of total revenue and fell to less than half of the year-to-date 2018 GOPPAR figure at $70.31.  

The challenges in rates, the report highlighted, this month were in contrast to room occupancy, which increased by 2.5-percentage points to 62.7%, marking a sixth month of year-on-year volume growth so far in 2018.

HotStats CEO Pablo Alonso said: “Whilst there have been some green shoots in top-line performance at hotels in the region in the last few months, much to the disappointment of owners and operators, this has not reached the bottom line.”

“This is understandable as the drop in profit levels at hotels in the Middle East & Africa has been unrelenting for such an extended time period that at this stage it is hard for management to cut any more costs whilst maintaining services and standards,” he added.

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