BROOMFIELD, Colorado—Among the many lessons we’ve all learned during COVID-19, patience surely is at the top of the list.
After the dramatic drops in all metrics earlier this year, STR’s profit-and-loss data for hotels in the U.S. continues to show equally dramatic yet slow improvements. Here are five takeaways from the October P&L report that examine these improvements in more detail.
(STR is the parent company of Hotel News Now.)
Bottom-line improvements
Gross-operating-profit margin grew 6 percentage points from 11.9% in September to 17.9% in October. This growth trickled down and is helping earnings before interest, taxes, depreciation and amortization per available room inch away from the red zone, as it moves from -$7.03 in September to -$3.24 in October.
Lower F&B expense contributes to lower break-even point for full-service hotels
Given the low group demand, full-service hotels have had to adapt by reducing their food and beverage operations, more so as it relates to catering and banquets. These changes have brought some relief as F&B-related expenses have declined enough, allowing hotels to break even at lower occupancy levels. Whereas pre-COVID-19 these hotels would break even when occupancy was in the 50%-60% range, now they can do so in the 40%-50% occupancy range.
Source: STR, © 2020 CoStar Realty Information, Inc.
Other F&B revenues are finally coming back
As events started getting canceled due to concerns over the pandemic, hotels had to refund deposits from canceled groups. In turn, other F&B revenue was the hardest-hit line item in the category, unable to record positive revenue figures since February and consistently reporting declines greater than 100% year over year. However, in October other F&B revenue returned to positives with $5.11 per occupied room, and the percentage change finally moved below the -100% mark, showing a decline of -91.9%.
‘Twas the conference season
October is usually the peak of “conference season,” but this year’s subdued number of events are bad news for the industry, and hotels in the upper-upscale class are taking the brunt of it as they typically absorb most of the group demand. Even though these hotels saw an improved TRevPAR (total revenue per available room) in October, they still show the lowest GOPPAR (gross operating profit per available room) of all the classes at $9.28, the lowest GOPPAR among other classes and a decline of over $100 year over year.
All industry segments back to positive
In times like these, even the smallest gains deserve a big celebration. With urban hotels reporting positive GOPPAR for the first time since February, albeit being only $0.12, we will applaud having all segments back into the positives.
Source: STR, © 2020 CoStar Realty Information, Inc.
A few other accomplishments worth noting:
- Airport hotels nearly tripled their GOPPAR to $7.69, up from $2.81 back in September.
- Resort hotels and small metro/town outperformed all other locations (all other segments, really). Yet, it was the small metro/town location that lead the way with almost $60 GOPPAR.
- The luxury class put up a fight in terms of TRevPAR, nearly matching that of resort and Small metro/town hotels but falling short in terms of GOPPAR. Yet, luxury-class hotels, known to lead in GOPPAR by a wide margin, reported the highest GOPPAR among other classes for the first time since February.
Claudia Alvarado is Analytics Manager with STR’s Consulting & Analytics team, based in Broomfield, Colorado.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.