Hotstats' comparison the AOHIS Investor Conference Madrid
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| Valuable exchange at the first AOHIS Investor Conference in Madrid (from left): Simon Allison, Christophe Beauvilain, Dillip Rajakarier, Dimitris Manikis. / Photo: AOHIS |
Madrid (January 27, 2023). Hotel markets are recovering worldwide. But costs put pressure on GOP margin analysis Michael Grove, COO of Hotstats, revealed how variable and fixed costs are now on the move at the AOHIS investors conference in Madrid on 16-17 January.
Looking at GOP margins of individual hotel segments, US margins in 2022 were well above 2019, but only in the luxury segment. In the most expensive category (Ultra Luxury), the margin shot up from 14.6% to 32.1% within two years, in the Luxury category it increased by only 3.5% (from 22.8% to 25.3%), and in the Upper Upscale there was only 1% in between. Whereas margins were stable in the Upscale segment, Upper Midscale and Midscale hotels saw significant margin declines in 2022 (both about 4%).
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| "The luxury segment is developing exceptionally well in all r egions," says Michael Grove. / Photo: AOHIS |
By comparison, Europe: There, the 2022 GOP margin overtook 2019 levels in only two segments: In Ultra Luxury, it increased from 31 to 36%; in Luxury, it increased by only 1% (from 33 to 34%). In all other categories - from Economy to Upper Upscale - margins fell in a range of two to five percent around the 38 percent mark. Economy hotels were the hardest hit, with a 5% contraction (43% in 2019 vs. 38% in 2022). In Germany, inflation has probably left its mark across all segments.
"The Luxury segment is performing exceptionally well in all regions, and the Ultra-Luxury segment in particular," Michael Grove summarised.
Laundry and energy drive costs
According to Michael Grove, the main drivers of the differences in margins are the increases in core costs, which can also drift far apart in the individual countries. The UK will be hit hardest in the 2019/2022 comparison. Energy costs skyrocketed 49%, linen expenses shot up 30% (per room in service), booking costs increased 26%, IT services expenses increased 13%, and F&B costs increased 10%. All of this drove the GOP margin down from 38.6% to 35.6%.
"The mix of variable and fixed costs is currently very much in motion," Michael Grove said, underscoring the overall trends, and observed that the fewest cuts have been made to fixed costs. He attributed the decline in margins in the UK to the strong link with occupancy in that country.
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| 30% more per room at the establishment - especially in the UK, spending on laundry shot up. / Photo: adobe stock Maciek |
Basically, Michael Grove also reads from his own statistics that seasonal hotels are more resilient in weak months due to lower fixed costs.
Energy costs hit the UK again
Hotstats underscored the hefty cost increases for energy with a graph showing the trend between December 2018 and November 2022: According to this, energy costs per available room in the UK have risen sharply from USD 7.10 to USD 12.33 (driven in part by laundry costs). In Europe, costs were moderate compared with the UK: They rose from USD 6.87 to USD 9.74. The increase was most moderate in the US itself - with a increase from USD 5.58 to USD 7.48.
Energy costs have overtaken labour costs almost everywhere in the world. Nonetheless, the latter remain a hefty chunk: In the Hotstats list, the United Kingdom again tops the negative list: Costs led the way in the 2019 to 2022 YTD comparison at 34%, followed by the Netherlands at 29% and Germany at 23%. Spain (with 22%) and Belgium (21%) also remain close together above the 20% mark; Poland and France bring up the rear with 14% and 11% respectively.
Michael Grove presented his data (only selectively published here) at the premiere of the AOHIS investors conference in Madrid on 16/17 January. Organiser Hoftel, an investor club initiated by Simon Allison, was pleased to welcome 280 participants. Half of them were hotel investors and owner operators (50%), followed by brand and management companies (20%), consultants/brokers, lawyers, lenders and financial advisors, architects, inward investment, and others.hospitalityInside.com was media partner of this event. / map
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