Comment: MENA hotels December performance

Comment: MENA hotels December performance
Philippe Vercruysse
Published: 3 February 2020 - 11:30 a.m.

A tough year for Middle East & North Africa hoteliers mercifully came to an end in December, a month that didn’t help their overall yearly results. Profit per available room was down 2.2% year-over-year, negatively contributing to an overall 1.4% YOY GOPPAR drop for the year, according to data from HotStats.

Profit was hampered by a weak top line that saw RevPAR down 3.1% YOY, pulled down by a 5.7% YOY decrease in average rate, even amid a 1.8-percentage-point uptick in occupancy. Decreases that also occurred in the F&B department brought total revenue down 2.6% compared to the same time the year prior.

The month’s drop in profit was almost entirely a result of weakened revenue, as expenses were kept in check and, in some cases, came down. Total costs among the undistributed departments decreased, among them, Sales & Marketing (-6.5%), Information & Technology (-19.3%) and Property & Maintenance (-8.7%), which included an 11.0% YOY drop in utilities. Total expenses on a per-occupied-room basis were down 9.7% YOY for the month, while total payroll on a per-available-room basis was down 7.3% YOY.

Still, hoteliers couldn’t overcome the difficult revenue predicament, which expense containment could not help, ultimately leading to a profit drop. Hoteliers can take some solace in profit margin, which was up 0.5 percentage points to 41.0%.

Bahrain stood witness to a year of violent swings on both the revenue and expense side of the coin. While RevPAR for the month was down 1.4% YOY, and TRevPAR was actually up 0.2%, GOPPAR was down a staggering 20.6% YOY. Nevertheless,The GOPPAR decline for the full year 2019 was contained 3.2%.

The story in December was expenses. Costs were up across the undistributed departments, including Property & Maintenance (up 27.5%) and a 23.2% jump in utility expenses. Total overhead costs were up 18.5% YOY. Meanwhile, total labour costs were actually down 3.3% YOY on a per-available-room basis.

Profit margin for the month was down 4.9 percentage points to just 19%.

Hotel performance in December in Dubai mimicked the greater MENA region. The emirate took a hit on both the top line and bottom line, evidenced by an 8.0% YOY decline in RevPAR, which was heavily impacted by a 8.3% YOY drop in average rate, despite a 0.3-percentage-point increase in occupancy. Similarly, Total revenue for the year 2019 was down 8.4%.

The precipitous drop in revenue carried through to profit. GOPPAR was down 9.4% YOY (14.0% for the year), dragged down further by an 8.0% YOY decrease in total expenses on a per-occupied-room basis.

The drop was even more striking considering that expenses on a whole were also down in December. Total expenses on a per-occupied-room basis were down 8% YOY, while payroll on a per-available-room basis was down 8.3%. Total utilities were also down to the tune of 14.7% YOY. As a result, profit margin was down 0.4 percentage points to 47.3%.

Click here to add your comment

Please add your comment below
Your email address will not be published