Unlike men, not all hotels are created equal. Each has its own location; own employees; own owner; own operator; own aesthetic; own nuance; own je ne sais quoi.
And though all hotels aren’t the same, the pandemic spared none, but its impact was felt differently across asset classes. In other shocks to the system—9/11, The Great Recession—it’s city-center luxury hotels with heavy reliance on corporate business that are most adversely affected at the jump.
Contributed by David Eisen, HotStats
Luxury hotels are often the domicile of well-heeled customers—the C-suite in town for an important meeting. It’s no surprise, then, that when disaster strikes, luxury hotels are historically the first asset class to founder. And though it may be the first asset class to stumble, the data shows that the luxury segment is oftentimes the first to bounce back after a thunderbolt.
According to HotStats data, in pre-pandemic July 2019, luxury hotels in the U.S. recorded total revenue per available room (TRevPAR) of US$390.42. By July 2020, the number was down to US$78.41—an 80% decrease. That represents a huge hole in rooms and ancillary revenue. However, by July 2021, TRevPAR popped to US$325.35 in luxury hotels—just 16% off the 2019 number.
Here’s the kicker: luxury hotel profitability in July 2021 was higher than it was in July 2019—US$114.38 to US$100.68, an increase of 13.6%. This is even more of a feat considering the fact that the U.S. luxury asset class in July 2020 recorded the lowest GOPPAR of any asset class and of any region at (US$15.66.)
Though revenue still trailed, it was expense containment that made up the gain. Consider total payroll: in July 2021, total labor on a per-available-room basis was US$117.55 compared to US$169.54 in July 2019.
On the other hand, both full-service and select-service hotels could not match the luxury segment’s snapback. GOPPAR in July 2021 versus July 2019 at full-service and select-service hotels was still off by US$19.32 and US$13.05, respectively.
The phenomenon is not isolated to the United States. In the Middle East, luxury hotels saw their fortunes turn, too. With luxury occupancy well below 25% as of July 2020, according to HotStats data, the rate increased by more than 10 percentage points in July 2021 and, coupled with an average daily rate of US$232, RevPAR was more than US$35 higher than it was at the same time a year prior. Mixed with a bump in ancillary revenue, GOPPAR for the month of July 2021 hit US$26.94 for luxury hotels, a level that was only US$6 off July 2019’s number.
Europe continued to be a laggard, as lockdowns and shuttered hotels did not help the cause. GOPPAR at luxury hotels in Europe in July 2021 was still 51% off its July 2019 level. Europe’s asset classes have plumbed the depths of the pandemic, with select-service the only asset class able to achieve positive profit in July 2020 at US$3.02. Luxury was down to US$9.27, while full-service basically broke even. At the same time in 2021, all asset classes are positive, but still vastly trailing 2019 levels.
The hotel industry is in want of good, sustained performance data. The good news is that it’s happening incrementally, but will take time before it’s back to normal. Moreover, what does the new normal look like and how will hotels adapt to the change of, for example, the work-and-stay hybrid?
All asset classes are different; measuring the rebound by segment is a smart way to see how far we’ve come and where we are headed.