Global report shows revenue hot spots in 2023

Hotels owners and operators were forced to adapt in this dynamic environment and harness the power of data to make informed choices, according to “Profit Matters: Global hotel performance review 2023,” recently released by HotStats.

By regularly assessing their operations against industry standards and best practices, hotels can more easily identify areas for improvement. 

The HotStats report provided data and regional summaries in four geographical areas: The Americas, Europe, the Middle East and Asia Pacific.

The Americas

In 2023, the Americas region saw a stabilization of both top- and bottom-line metrics. This was best evidenced by the flattening of the 12-month moving average of total revenue (TRevPAR) and gross operation profit (GOPPAR) on a per-available-room basis, which remained consistent from the second quarter through the end of the year.

The U.S. saw extraordinary expansion in the first quarter, with TRevPAR increasing 32.5% and GOPPAR increasing 38.8%. Growth for the rest of the year slowed and was more erratic, with TRevPAR showing slight increases each quarter while GOPPAR decreased in the second and third quarters and had modest growth in the fourth.

The difference in its high and low seasons marked growth in the Caribbean with TRevPAR (up 45%) and GOPPAR (up 59.3%) increasing dramatically in the high season and those same numbers showing more modest growth in the low season (TRevPAR up 12.6% and GOPPAR up 12.7%).

According to the report, continued labor costs in the Americas eroded profitability as the year progressed. While TRevPAR increased 8.8% YOY, labor costs per available room increased 12.3% for the year. While some of this increase was due to recovering staff counts and normalization of service standards, it was also driven by the increased hourly wage cost.

The hospitality industry in the region had a normalization of revenue, expenses and profitability trends in 2023 but faces stiffer challenges this year, especially when those numbers are compared to the pre-pandemic numbers of 2019.

Europe

According to the report, from a top-line perspective, 2023 was a banner year for Europe, with ADR growing 6.9% year-over-year, occupancy lifting 6.6%, and RevPAR growing double-digits with an 18.3% increase. These positive numbers were aided by easier comps as Europe was still mired by the effects of COVID, especially early in 2022.

The revenue growth rate slowed later in the year, with Q423 TRevPAR growth slowing to 5.5% and Q4 GOPPAR slowing to 2.9%. The report concluded that European hotels are still in much better shape than would have been expected 18 months ago, as ADR is up 27.8% compared to 2019, and there are no immediate signs that it will weaken.

Still, the report showed that while metrics are improving, that growth hasn’t converted directly to margin improvement as of yet as inflation, supply chain challenges and labor costs continue to eat into those margins.

Across segments, extended-stay properties have struggled to continue their performance of the past few years, while select- and limited-service properties improved the most year over year. In terms of profit margin, the midscale segment saw the biggest improvement at 6.7% YOY, while ultra-luxury saw a drop in margin, with luxury and upper upscale remaining flat.

Another factor that cuts into margin is the ongoing challenge around food and beverage profitability. The report said that while year-over-year changes are small compared to 2019, most of Europe has seen a significant drop in profit.

Middle East

The Middle East faced challenges in 2023 but saw a recovery in the hospitality sector. However, it has not been uniform throughout the region, with strong revenue gains in the UAE and Saudi Arabia and losses in occupancy and TRevPOR (Total revenue per occupied room) in Oman, Qatar and Bahrain. While ADR and TRevPOR were up overall in the Middle East, occupancy was down 2% for the year.

Across segments, there is growth in every class in the region, with the strongest gains being in ultra-luxury and upscale.

Labor costs are not as big of an issue in the region, as revenue expansion outpaced payroll growth overall in the Middle East throughout 2023, especially in countries like the UAE, Saudi Arabia and Egypt.

However, hotels in the region faced challenges from oil price fluctuations, economic uncertainty and the lingering effects of the pandemic. Supply chain disruptions also impacted the operational efficiency of hotels in the Middle East.

The ongoing development in Saudi Arabia has had a transformational effect on the region, especially in the UAE. Occupancy in the UAE grew from 61.8% in 2022 to 65.9% last year, and ADR rose from $181.25 in 2022 to $215.07. Saudi Arabia’s “Vision 2030” plan will lead to an influx of tourists into the region, and the UAE is well-positioned to benefit the most from that increase.

Asia Pacific

The Asia Pacific region rebounded in 2023, but the growth was far from uniform. According to the report, South Asia is the outlier, especially during the high season months (mid-November through mid-February) when its GOP doubles compared to the rest of Asia and, in some cases, quadruples against the performance of East Asia. However, during the low season, South Asia’s GOP margins take a big hit, and it is the worst-performing area between April and September.

GOP margin sways significantly in the Oceania region compared to Southeast Asia. Although Oceania leads overall in GOP, it loses out 10 months of the year due to the high cost of doing business.

India has seen a significant increase in ADR since mid-2022, but the report noted that the Maldives skews the GOP results because of its powerful performance.

Across segments, extended-stay and select-service provide the most stable returns, while luxury far exceeds the GOPPAR margins of all other asset classes. According to the report, luxury has grown its GOP figure by 9.5%, while GOP margins have remained flat between 2019 and 2023. The report said this is due to the impact of inflation over the past two years and the fact that hotels could not operate as efficiently as they did during COVID.

There is a large variation across the region when comparing TRevPAR in 2023 vs. 2022 across the top 10 markets in the region. Thailand is the big winner, with TRevPAR growth of 46% compared to a cost-of-sale increase of only 5.7%. Indonesia is a different story, with a 38% revenue growth coupled with a 24.4% increase in cost of sale.

Revenue growth in China was up 75% last year, which was expected as 2022 was still a COVID-affected year for the market. Growth was slower in the Maldives (3.4%), which had a difficult comp after being the first country to reopen in 2022.

Click here for a copy of the report.