PROFITS CONTINUED TO grow for U.S. hotels in August despite concerns about an economic slowdown, according to HotStats. And a recent report from the research firm found that those same concerns did not prevent 2018 from being a profitable year in general.
Gross operating profits per available room increased 1.4 percent in August over the same time last year, as did RevPAR, which was up 1.4 percent, according to monthly data from HotStats. That continued a trend for the year, during which only April saw a decline in GOPPAR, dropping 4.5 percent.
At the same time, GOPPAR’s $76.95 level was 24 percent below the year-to-date average of $101.21. And while RevPAR was up for the month, occupancy was down 0.2 percentage points, but bolstered by a 1.7 percent gain in ADR.
Total revenue per available room was up 2.2 percent for the month and profit conversion was 32.8 percent of total revenue for the month, sapped by a 3.4 percent increase in payroll per available room. Similar growth was seen in June.
“U.S. hoteliers continue to drive profits despite contending with monthly rises in expenses,” said David Eisen, HotStats’ director of hotel intelligence for the Americas. “With costs including labor and A&G rising in August at a rate higher than RevPAR, it’s become even more critical that costs are flexed in order to maintain profit levels.”
In 2018, full-service hotels achieved a 3.4-percent increase in profit to $97.87 despite uncertainty over the U.S.-China trade war and other factors, according to HotStats’ report “Profit Matters: U.S. Annual Hotel Performance Tracker 2019.” RevPAR rose 2.4 percent during the year due to a 2.6 percent rise in ADR, but at the same time occupancy dropped 0.1 percent to 77.2 percent.
The future may not be as bright, however.
“The days of 3 percent GDP growth are over. Estimates forecast GDP growth of below 2 percent in the first quarter and around 2.5 percent in the second quarter,” the HotStats report said. “A large culprit for the enervated growth is a slowdown in both the economies of Europe and China. And while labor costs were not as big an issue in 2018 as some might have expected, 20 states will raise their minimum wages in 2019. Big-box retailers like Target and Walmart have already raised their minimum wages and promised future increases, putting pressure on other industries to keep up.”