COVID-19

‘Devastating’ hit on Europe profit

Goppar in March 2020 plummeted by 115.9% compared to the previous year to -€8.33, according to HotStats.

Driving this profitability slump was a contraction in demand, with occupancy in March falling by 44.8 percentage points year-on-year to 27.4%, which in turn drove revpar down by 66.2%

This was the first triple-digit year-over-year decrease in profitability ever recorded in the HotStats database for Europe, as well as the first time goppar turned negative in the region.

In response to this undistributed expenses on a per available room basis fell across the board, resulting in a 25.3% year-on-year decrease in overhead costs. Total labour costs also adjusted downwards by 28.8%. However, these flex efforts were not enough to offset the lost revenue, and profit margin in Europe was recorded at -13.1% in March 2020, placing 45.7 percentage points below the same month of the previous year.

The March results are in stark contrast to the two previous months, as both January and February had recorded gear-on-year goppar growth, up 0.7% and 1.2%, respectively. However, the severity of the downturn in March made the first quarter of 2020 the worst performing Q1 in Europe recorded by HotStats since it started charting the region’s data. The Year-on-year contraction in goppar for Q1 2020 was 49.9%, amply surpassing the previous record set by Q1 2009, when profit per room fell by 22.2%, the result of the Global Financial Crisis.

Italy was the hotspot of the coronavirus outbreak in Europe in March, as cases in the country increased from 400 at the end of February to more than 53,000 barely one month later. Lombardy, Italy’s most affected region, was the first to be placed under forced quarantine. As early as March 8th, the Italian government prohibited anyone from entering or leaving the northern region and its capital, Milan. Hoteliers in the city had already faced a profit per room contraction in the month of February, with a 27.1% year-on-year fall in goppar. In March, the spread of the pandemic and the containment measures associated with it severely deepened this trend, resulting in a record 182.1% Year-on-year Goppar drop to -€64.96.

Lost demand was at the heart of the top-line slump. Occupancy in the city marked an all-time low in March at 1.7%, a 69.5-percentage-point decline compared to the same month of the previous year. Average rate followed suit and was slashed by 21.5% Year-on-year. As a consequence, revpar recorded a year-on-year contraction of 98.1%. F&B revenue was cut by 96.2% year-on-year on a per-available-room basis, and with the rest of the revenue centres sharing in this same downward trend, trevpar plunged by 96.2% compared to March 2019.

Expenses were slashed across all operated and undistributed departments to compensate for the precipitous revenue decline. Total overheads per available room were down by 49.4% Year-on-year, and labour costs dropped by 53.8% year-on-year. However, this was not enough to prevent the erosion of profit margin in March, which placed 600.9 percentage points below the same month of 2019, at -574.1%.