Maximizing Global Hotel Profitability: Insights from Laura Resco at 1TourismWorld
The Imperative of Data-Driven Decisions
In the dynamic and competitive landscape of the hospitality industry, mastering the balance of revenue, expenses, and profitability is crucial. Laura Resco, Director of Hotel Intelligence - Americas for HotStats, delivered a compelling session at 1TourismWorld, focusing on global hotel profitability trends. This comprehensive analysis highlights key insights from her presentation, emphasizing strategic data-driven approaches to enhance profitability and navigate the post-pandemic recovery effectively.
Leadership in Hotel Intelligence: Meet Laura Resco
Laura Resco, a distinguished expert in the hospitality sector, serves as the Director of Hotel Intelligence - Americas at HotStats. With a robust background in analyzing hotel performance metrics, Laura plays a pivotal role in guiding hoteliers and asset managers to optimize their profitability. HotStats, a global leader in profit and loss benchmarking and optimization, leverages extensive data from over 11,000 hotels worldwide to deliver actionable insights on departmental revenue, expenses, and profitability trends.
The Power of Data: Transforming Opinions into Strategy
Laura began her session by underscoring the critical importance of data in driving strategic decisions, quoting William E. Deming: "Without data, you are just another person with an opinion." This set the tone for a data-centric discussion, illustrating how HotStats' comprehensive database and benchmarking capabilities empower stakeholders to make informed, strategic decisions.
HotStats: A Global Benchmarking Authority
HotStats operates globally, with offices in the UK, Houston, Texas, and Bangkok, covering the Asia-Pacific region. The company processes profit and loss statements from a diverse range of hotel operators, owners, and asset managers, representing over 790 companies. This extensive data collection allows HotStats to offer detailed reporting on more than 500 key performance indicators (KPIs) across 160 countries.
Core Offerings: Benchmarking and Market Intelligence
HotStats provides several essential services to the hospitality industry:
- Internal Benchmarking: This service enables operators and asset managers to compare the performance of individual hotels within their portfolios, identifying top performers and best practices to enhance overall performance.
- External Benchmarking: Hotels are compared against a relevant set of external competitors, helping identify opportunities for improvement and profitability enhancement.
- Market Reporting: This product offers insights into the profit performance of various markets worldwide, guiding investment decisions and strategic planning.
Global Performance Trends: A Comparative Analysis
Laura presented a comprehensive overview of performance trends across different regions, using Total Revenue Per Available Room (TRevPAR) and Gross Operating Profit Per Available Room (GOPPAR) as key metrics. Notably, all regions, including Asia-Pacific, had surpassed their January 2020 TRevPAR levels by December 2023. However, the pace of recovery varied significantly:
- Asia-Pacific: This region is still in the early stages of recovery, having lifted travel restrictions later than others.
- Middle East: Exhibited the greatest top-line expansion and consistent growth throughout 2023.
- US and Europe: Both regions plateaued in top-line growth during the second quarter of 2023, stabilizing around specific averages.
Profit levels mirrored these trends, with the Middle East leading in growth, followed by Asia-Pacific, while the US and Europe experienced plateauing or slight declines in GOPPAR during the same period.
Revenue and Profitability Dynamics: A Quadrant Analysis
Delving into the interaction between revenue generation and profitability, Laura used a quadrant analysis to compare key global markets' performance in 2023 versus 2019. The analysis revealed distinct patterns:
- Underperforming Markets: Major US cities like San Francisco, Chicago, Boston, and Washington, DC, along with Shanghai, remained behind 2019 levels in both TRevPAR and GOPPAR.
- High Performers: Leisure destinations such as Miami, Dubai, Phuket, Lisbon, and the Caribbean achieved growth in both top-line and margins, reflecting robust recovery in leisure travel.
- Margin-Struggling Markets: Cities like Barcelona, London, and Budapest faced challenges with inflation and increased energy costs, impacting profit margins despite top-line growth.
Laura stressed the importance of focusing on cost control to ensure that revenue growth translates into profitability.
US Market Insights: Trends and Challenges
The session provided an in-depth analysis of the US market, highlighting performance across different brand scales and regions. Key insights included:
- Brand Scale Profit Margins: Ultra-luxury and luxury segments saw the greatest margin compression due to high pre-pandemic benchmarks and the return of previous service standards. Midscale and economy segments struggled to absorb inflation and labor costs.
- Quarterly Performance: The US experienced higher margins in Q1 2023 compared to 2022 due to the negative impact of Omicron at the start of 2022. However, weaker summer performance led to lower margins in Q2 and Q3, with a recovery in Q4 driven by strong group and event business.
- Revenue Stream Recovery: Conference and banqueting revenue per available room surpassed pre-pandemic levels in several months of 2023, indicating a robust recovery in group business. Other revenue streams like rooms and food and beverage also showed strong recovery trends.
Cost Structures and Labor: The Profitability Equation
Laura highlighted the critical role of cost management in maintaining profitability. Labor costs have increased at a higher pace than revenue across all departments, with a significant reliance on contracted labor due to staff shortages. This shift has implications for maintaining service quality and managing operational costs.
International Comparisons: Learning from Global Markets
Comparing the US with international markets like the UK and the UAE provided additional context:
- UK: Struggled to return to pre-pandemic profit levels due to higher operating and undistributed expenses.
- UAE: Demonstrated exceptional cost control and margin growth, with GOP margins in 2023 nearly 10 percentage points higher than in 2019.
Ancillary Revenues and Distribution Costs: Unpacking Profitability
Laura also covered ancillary revenue streams in the US, noting significant growth in areas such as golf, parking, and food and beverage outlets. However, cancellation fees decreased as travel patterns normalized. She emphasized the importance of optimizing revenue across all departments to maximize profitability.
Distribution costs, particularly commissions and reservations fees, were highlighted as significant expenses that vary by brand scale. Ultra-luxury properties incurred the highest transient commissions, while upper-upscale properties led in group commissions, reflecting their reliance on conference and banqueting business.
Embracing Sustainability: A Dual Focus on Costs and Revenue
In her concluding remarks, Laura underscored the growing importance of sustainability in the hospitality industry. Sustainability is critical not only for cost control but also increasingly influences guests' purchasing decisions and corporate travel budgets. Hotels prioritizing sustainability are better positioned to attract environmentally conscious travelers and corporate clients.
Navigating the Path to Profitability
Laura Resco's session at 1TourismWorld provided a comprehensive and data-driven overview of global hotel profitability trends. By leveraging HotStats' extensive benchmarking capabilities, hoteliers and asset managers can navigate the complexities of the post-pandemic landscape, optimize their operations, and achieve sustained profitability. As the industry continues to recover and evolve, staying informed and proactive will be key to success.
In today's competitive hospitality market, data-driven strategies and a keen focus on cost management and sustainability will determine which players thrive. Laura's insights offer a roadmap for hoteliers aiming to enhance profitability and secure a prosperous future in an ever-changing global environment.
