Market Reports

MENA Chain Hotels Market Review - September 2018

Hotels in the Middle East & North Africa recorded a 34.8-percent year-on-year decrease in profit per room in September, as revenue levels slid and costs escalated, according to the latest data tracking full-service hotels from HotStats.
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Lower Revenues, Higher Costs Lead to Profit Dips at Middle East & North Africa Hotels

HotStats

Hotels in the Middle East & North Africa recorded a 34.8-percent year-on-year decrease in profit per room in September, as revenue levels slid and costs escalated, according to the latest data tracking full-service hotels from HotStats.

September signalled yet another month of year-on-year profit decline for hotels in the region as the growth recorded in August’s positive month of performance was wiped away. At $37.82 for the month, GOPPAR was only just above the annual low of $35.80 recorded in June.

The drop in profit was led by declines across all revenue centres, including Rooms (down 15.4 percent), Food & Beverage (down 10.7 percent), Conference & Banqueting (down 6.3 percent) and Leisure (down 14.6 percent), on a per available room basis. This mix contributed to a 13-percent decrease in TRevPAR for the month to $159.66.

RevPAR declines were a result of a drop in both room occupancy, which fell by 1.9-percentage points to 64.4 percent, coupled with a 12.8-percent decline in achieved average room rate, which fell to $137.74. This was the lowest average room rate recorded in the region in 2018.

The drop in revenue was further exacerbated by rising costs, which included a 4.4-percentage-point increase in payroll, to 34.8 percent of total revenue, as well as a 4.1-percentage-point increase in overheads, which grew to 33.8 percent of total revenue.

Profit & Loss Key Performance Indicators – Middle East & North Africa (in USD)

September 2018 v September 2017

RevPAR: -15.4% to $88.73

TRevPAR: -13.0% to $159.66

Payroll: +4.4 pts. to 34.8%

GOPPAR: -34.8% to $37.82

As a result of the swings in revenue and cost, profit conversion at hotels in the Middle East & North Africa was recorded at 23.7 percent of total revenue in September, well below the margin for year-to-date 2018 at 34.7 percent.

“The month of September is illustrative of the challenges hoteliers in the MENA market have faced in recent years, with profit per room recorded at $37.82 this month, which is half of the GOPPAR recorded in the same period in 2015,” said Michael Grove, Director of Intelligence and Customer Solutions, EMEA, at HotStats. “Whilst the year-on-year decline this month may be, in part, due to the high recorded this time last year, as the Eid al-Adha celebrations crept into September, the longer term trend of decline in profit will be more of a worry for hotel owners and operators in the region.”

In contrast to the decline across all KPIs at hotels in the region, properties in Riyadh successfully recorded an 18.5 percent year-on-year increase in GOPPAR this month to $58.07, which was driven by demand associated with a number of major conferences in the Saudi capital.

The growth in profit at hotels in Riyadh was led by a 10.7-percent increase in rooms revenue per available room to $101.09, which was due to an 11.1-percentage-point increase in room occupancy to 59.6 percent, which offset the 9.9-percent decline in achieved average room rate to $169.71.

The growth in rooms revenue also successfully compensated for the decline across all non-rooms departments, including Food & Beverage (down 3.7 percent) and Conference & Banqueting (down 17.7 percent), on a per available room basis.

As a result of the movement across all revenue centres, TRevPAR at hotels in Riyadh increased by 5.1 percent year-on-year to $162.45. And whilst this was almost $60 above TRevPAR recorded in the Saudi capital in August, it remained 11.8 percent below the year-to-date figure at $184.11.

The growth in TRevPAR at hotels in Riyadh was further buoyed by a year-on-year drop in payroll, which fell by 0.7 percentage points, to 33.5 percent of total revenue.

Primarily due to the growth in room occupancy this month, profit margin at hotels in Riyadh was recorded at a healthy 35.7 percent of total revenue, which is only just behind the conversion of 37.6 percent recorded at hotels in the city in the nine months to September 2018.

However, growth in profit at hotels in Riyadh was against a worrying backdrop of declining room rates, which included a decrease in rate in the corporate (down 12.4 percent), individual leisure (down 52.8 percent) and group leisure (down 42.5 percent) segments.

Profit & Loss Key Performance Indicators – Riyadh (in USD)

September 2018 v September 2017

RevPAR: +10.7% to $101.09

TRevPAR: +5.1% to $162.45

Payroll: -0.7 pts. to 33.5%

GOPPAR: +18.5% to $58.07

In line with the decline in the wider region, the timing of Eid al-Adha this year meant that year-on-year profit plummeted at hotels in Medina in September, following a strong month of GOPPAR growth in August.

In addition to recording a 40-percent year-on-year decline in September to $107.35, RevPAR at hotels in Medina this month was almost $128 below August, when the city benefited from celebrations associated with the holy festival.  

In addition to the drop in rooms revenue, hotels in Medina recorded a decline across all other revenue centres in September, which contributed to the 35.7-percent year-on-year decrease in TRevPAR to $183.72.

As a result of the movement in revenue and cost, profit per room at hotels in Medina fell by 54 percent year-on-year to $80.74. Whilst this was 15.3 percent below GOPPAR recorded at hotels in the Saudi city in the nine months to September 2018, it was also $190.90 below the profit per room in August.

“The revenue and profit performance at hotels in Medina did not read well this month; however, owners and operators will not be too dismayed following the outstanding performance last month,” said Grove.

Profit & Loss Key Performance Indicators – Medina (in USD)

September 2018 v September 2017

RevPAR: -40.0% to $107.35

TRevPAR: -35.7% to $183.72

Payroll: +10.8 pts to 29.9%

GOPPAR: -54.0% to $80.74

 

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