REGIONAL REPORT
Budget
From left : Oliver Bonke , CEO of Deutsche Hospitality ; Adam J . Goldberg , partner at Boston Consulting Group ; and Sean F . Hennessey clinical associate professor at the Jonathan M . Tisch Center of Hospitality , NYU School of Professional Studies , discuss findings of new survey focused on borrowing costs and industry fundamentals .
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EXPENSES ARE BITING INTO THE P & L .
Contributed by LAURA RESCO , HOTSTATS
Laura Resco , director of hotel intelligence – Americas , HotStats
2022 saw U . S . hotel profit margins jump . This year , they ’ ve taken a step back . From January through July of 2022 , hotels in the U . S . saw gross operating profit ( GOP ) margin increase by 9 percentage points year-over-year , moving from 30.3 % to 39.3 %. However , the story is very different when we look at the current year ’ s performance : In the first seven months of 2023 , GOP margin decreased by 1.2 percentage points to 38.1 %. And even though this number is still higher than the results of 2021 , it is an early warning sign that cost pressures are on the rise and hoteliers should take a close look at resource allocation during the upcoming budgeting process .
Disaggregating the data by brand scale shows that this margin contraction is not homogeneous . While the upper-upscale and upscale segments had YOY margin falls of 0.9 percentage points each , the extremes exhibited much deeper declines : 3.3 percentage points in the case of midscale and economy and 2.9 percentage points in the case of luxury .
Labor costs are key in understanding the downward trend in margins . As depicted in Figure 2 , the YOY growth in labor costs vastly outpaces the growth in total revenue on a per-available-room basis . Moreover , for midscale and economy properties , this spread resulted in a 3.7 % GOPPAR decrease , while luxury properties achieved a meager 0.8 % YOY GOPPAR uptick .
When we look at performance by geography , the data show disparate results . To have a more holistic understanding of the profitability story , we present a matrix
42 hotelsmag . com October 2023