NASHVILLE, Tennessee — Over the past two years, hotel profit and loss accounts have undergone a dramatic change in the way they are analyzed.
During a session at the Hotel Data Conference titled “Parsing the P&L: Analyzing Changes in Profit and Loss,” Audrey Kallman, operations analyst at STR, said revenues, costs, and expenses changed in order of magnitude. importance during the pandemic months. STR is the hotel analytics company of the CoStar Group.
Kallman added that they will continue to change as hoteliers enter budget season.
There is also a need to understand what profitability meant in the years before and during the pandemic, which will inform how to better measure profitability in the future, she said.
“Profitability peaked in 2019, but that year all segments saw very little [total revenue per available room]”, Kalman said. “Over the past four years, labor costs have outpaced revenue growth, and as occupancy increases, you’ll see a further increase in labor costs. work.”
Kallman said the break-even occupancy percentage declined during the pandemic and continued to decline as hoteliers understood more about how to cut expenses.
In 2019, total US RevPAR averaged $209.27, but dropped 65.8% to $71.59 in 2020.
Gross operating profit per available room as a percentage of revenue was 37% in 2019, but only 13.2% in 2020. While earnings before interest, taxes, depreciation and amortization as a percentage of revenue was 26.2% in 2019, this measure has collapsed in 2020 for -73%.
“Only 45% of hotels had positive net income in 2020. … Profit declines tend to follow revenue declines,” Kallman said.
Hoteliers are eager to see how profitability can be optimized as more U.S. markets recover.
Kallman said total RevPAR topped 2019 levels for the first time in June 2022, hitting $226.10, down from an average of $224.60 in 2019.
June 2022 gross operating profit per available room ($91.23) also exceeded June 2019 levels ($90.88).
“Room premiums have grown [total revenue per occupied room] growth,” Kallman said.
She said expense ratios generally follow a typical pattern.
“Labour costs per occupied room were $30.82 in 2019 and $33.70 in 2022; [food and beverage] costs were $32.99 in 2019 and $30.21 in 2022. If a hotel has less [food and beverage] labor, which generates stronger margins, 35% in 2019 and 31% in 2022,” she said.
Payroll taxes and payroll taxes have increased significantly during the pandemic. In 2022, they rose to 65% and 35% respectively, compared to 71% and 29% in 2018.
“It’s because hotels have changed their staffing structures, using more contract staff,” Kallman said.
“Revenue growth before the pandemic could not keep up with the growth in labor costs, leading to lower profit margins. … The pandemic recovery is being driven by the rebound in demand coupled with high rates, with the return to 2019 US profit levels arriving in the second quarter of 2022,” she said. “The hotel staff crisis is leading to strong wage growth despite an overall drop in the workforce. .”
The good news is that profit margins today are very close to surpassing the 2019 peak, Kallman said.
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