Local Business

Hotels in Mena record profit dip in November

Issac John /Dubai
Filed on January 2, 2020

(KT file)

For hotels in the Middle East and North Africa, two consecutive months of profit growth gave way to a contraction in November as Dubai's hospitality sector recorded a profit drop of 9.6 per cent year-on-year, according to a HotStats Hospitality Intelligence report.

Challenged by excessive and unabated hotel supply and development, Goppar - gross operating profit per available room - of Dubai hotels declined by 9.6 per cent to $135.41 in November, said HotStats. "The coming months and years will require hoteliers to be more cost-conscious than revenue-conscious," hospitality industry experts say.

According to HotStats, due to the excessive supply RevPAR (revenue per available room) in Dubai was down 9.3 per cent year on year in November to $183.11, as room rates dropped 8.6 per cent combined with a -0.7 per cent percentage-point decline in occupancy. Total overhead costs declined in the month, down 6.2 per cent year-on-year, but not enough to produce positive profit growth, evidenced by a 0.4 percentage-point decline in profit margin.

In the Mena region, Goppar declined 1.7 per cent year-over-year, according HotStats. "The region had a nice, albeit short, run of Goppar gains prior to November's downtick, but the drop is more in line with Mena's overall dim 2019 performance. If there is a silver lining, the 1.7 per cent drop is the smallest yerar on year decrease of the year and far smaller than the year to date number of minus-4.2 per cent," said the report.

The Mena region's room revenue was down 2.6 per cent compared to the same month last year, dragged down by a 5.1 per cent drop in room rate. Occupancy for the month was up 1.9 percentage points to 76.2 per cent.

"The drop in rooms RevPAR, along with a 1.5 per cent year-on-year decrease in F&B RevPAR, equated into an overall decrease in total revenue of 2.7 per cent," said the report.

"And while generating revenue in November proved onerous, expense control was a bright spot. Total overhead costs on a per-available-room basis were down 3.4 per cent and total labour costs were also down - 2.4 per cent year-on-year. Utility expenses came down 3 per cent, while overall property and maintenance costs were down 2.6 per cent," the HotStats report said.

In contrast to Mena trend, Egypt pushed out a positive month of profit, with a 2.9 per cent overall year on year jump. This came on the back of a 1.3 per cent rise in RevPAR and a 3.6 per cent rise in TRevPAR (total revenue per available room).

- issacjohn@khaleejtimes.com


Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.

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