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Global Hotel Demand Uptick Tussles with Competing Costs

With the global pandemic showing some signs of relent, the collective hotel industry is reaping the reward, as travelers get back on planes or hit the road for a well-needed break from work-from-home monotony and Netflix overload. The hotel industry is happy to welcome them back, but a continued revenue shortfall—the product of some segments still not returning with gusto, such as corporate and group—complemented by expense creep and an all-too-difficult labor market, are having consequence on the bottom line.

The U.S. Push

Here’s a stat: On June 25, 2021, 2,137,584 people passed through U.S. airports, according to the TSA, a number that was 78% of the total on June 25, 2019, and 237% more than on June 25, 2020. People are moving again, which means they are staying at hotels again.

In the U.S, where many states and municipalities continue to relax COVID protocols, revenue continued its march forward in May, with RevPAR up 539% over the same time a year ago, but still 51% lower than May 2019. With rooms revenue buoyed by the leisure segment, total revenue followed suit, up to $127 per available room, a 541% increase over the same time a year ago.

Labor costs are up nearly $20 per available room since last May, a cost that should continue to escalate as hoteliers find that they have to shell out more and add incentives to lure employees who are either still reticent to return to hospitality jobs or have switched career paths.

Gross operating performance per available room hit $40.55 in May, a 319% increase over the same time a year ago, but 63% lower than May 2019.

Europe Still Stuck

Europe’s hotels lag other regions as many countries continue to employ regulations hindering a travel comeback. In May, hotels could only muster TRevPAR of $49.83, which led to an almost break-even GOPPAR of €2.52, which, though extremely low, was actually the first month of positive profit for the region since September 2020.

Total labor costs in the month hit €23.76, which were 46.8% higher than at the same time a year ago, and only €6 less than total rooms RevPAR.

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APAC Steady Rise

In Asia-Pacific, strong domestic travel is having a profound impact on the region’s hotel performance. RevPAR in the month hit $59.07, which was 141% higher than at the same time a year ago. It was bolstered by an almost 50% occupancy rate and rising ADR, which hit $118 in the month. TRevPAR of $106.39 was the product of a continued rise in ancillary revenue, as F&B RevPAR hit $40.77 in the month of May, 152% higher than at the same time a year ago.

Digging into revenue were overhead costs, which, at $30.26 per available room, were up 44.9% over the same time a year ago and $12 lower than May 2019. GOPPAR in the month came in at $27.55, a resounding 1,040% higher than May 2020, but still less than half of May 2019.

Middle East Makes Mark

Similar to APAC, the Middle East is riding a nice rebound on the back of higher rates and rising occupancy. RevPAR in the month was recorded at $76.57, a 222% increase over the prior year, helping lead to TRevPAR of $120.88, a 228% increase over the same time a year ago.

Meanwhile, as labor costs remain steady, just shy of $40 per available room, GOPPAR hit $37.29 in the month, 430% higher than at the same time a year ago. The Middle East has now had 10 consecutive months of positive profit performance.

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