The challenges for hotels in the Middle East and Africa continued in July, as profit levels foundered to a record low, data showed.

Total gross operating profit (GOPPAR) at hotels in the region dropped to a new low of $34.70 in July as temperatures in the region soared and demand levels lagged, according to the latest worldwide poll of full-service hotels from HotStats.

This was the fourth month in a row in which year-on-year profit levels at hotels in the region have fallen, a disappointment following a relatively positive first quarter of 2018.

GOPPAR has now dropped by almost 30 per cent in the last 36 months to $73.08 in the 12 months to July 2018, from $94.53 in the 12 months to July 2015.

As in June, hotels in the Middle East & Africa successfully recorded an increase in RevPAR, which grew by 1.6 per cent in July to $86.55. However, this was dampened by falling non-rooms revenues, as well as rising costs, which led to the drop in GOPPAR.

Non-rooms revenues accounted for 42.5 per cent of all revenues in July and despite recording a drop in food & beverage (down 0.9 per cent) and conference & banqueting (down 6.3 per cent) revenue on a per available room basis, TrevPAR at hotels in the Middle East & Africa increased by 0.5 per cent to $150.46.

However, rising costs, which included a 0.6-percentage-point increase in payroll to 35.2 per cent of total revenue, as well as a 0.6-percentage-point uplift in overheads to 34.4 per cent of total revenue, cancelled out the growth in total revenue.

As a result of the movement in revenue and costs this month, profit conversion at hotels in the Middle East & Africa was recorded at just 23.1 per cent of total revenue and fell to less than half of the year-to-date 2018 GOPPAR figure at $70.31.

Achieved average room rate remains a test for hotels in the region, falling by 2.6 per cent this month to a new low of $138.03, which represented the 11th consecutive month of year-on-year decline in this measure.

Although hotels in the Middle East & Africa successfully recorded a 1.0 per cent increase in achieved rate in the group leisure segment this month, declines were recorded across all other segments, including Best Available Rate (down 6.0 per cent), corporate (down 7.5 per cent), residential conference (down 0.4 per cent) and individual leisure (down 1.0 per cent), suggesting this is a demand-wide issue.

The challenges in rate this month were in contrast to room occupancy, which increased by 2.5-percentage points to 62.7 per cent, marking a sixth month of year-on-year volume growth so far in 2018.

“Whilst there have been some green shoots in top-line performance at hotels in the region in the last few months, much to the disappointment of owners and operators, this has not reached the bottom line,” said Pablo Alonso, CEO of HotStats.

“This is understandable as the drop in profit levels at hotels in the Middle East & Africa has been unrelenting for such an extended time period that at this stage it is hard for management to cut any more costs whilst maintaining services and standards.” - TradeArabia News Service