U.S. hotel industry profitability quickly recovered in February after a slowdown at the start of the year partially due to reduced travel amid concerns about the spread of the omicron variant of COVID-19.
Gross operating profit per available room (GOPPAR) for the U.S. hotel industry — a metric that measures the relationship between revenue and expenses — reached 77% of February 2019 levels, which is comparable to the highs achieved in the summer of 2021.
Profit margins also returned to normal levels, with February gross operating profit margins only 1.8 percentage points lower and earnings before interest, taxes, depreciation and amortization margins only 2 percentage points lower than February 2019.
Normal profit margins have been a trend throughout the pandemic because hotels have had to adjust to lower levels of demand and employment by operating in a more limited capacity. Labor costs have also started to steady as the higher wages many hotel operators are paying out to attract and retain labor are being absorbed by higher rates.
In the top 25 markets all but two markets realized positive GOPPAR levels compared to 2019.
Four markets — Miami, Phoenix, Tampa and Los Angeles — achieved higher GOPPAR levels than they did in February 2019.
The two markets that realized negative GOPPAR levels were New York and Chicago. These two markets have struggled to make much headway with a lack of convention, group and business travel, and lower international visitor numbers. However, even in peak performance periods, both markets realized relatively low GOPPAR – $5 for New York and $8 for Chicago in February 2020.
Although GOPPAR is still negative in these two markets, both have realized GOPPAR improvements of 141% (New York) and 172% (Chicago) since last year and will continue to grow profitability as recovery continues.
Raquel Ortiz is director of financial performance at STR.