BRUSSELS Hotels in Belgium’s capital city is hoping September’s operating results are a bit stronger, following an August in which profitability levels dropped to negative-€6.62 per available room during recess of the European Parliament, according to TRI Hospitality Consulting data.
As disappointing as the month was for Brussels hoteliers, August was actually better this year than in 2009, when the gross operating profit per available room (GOPPAR) was negative-€8.3.
While the market mix in Brussels is dominated by corporate and conference demand during most of the year, accounting for approximately 60% of total demand, business from the commercial sector declined to 43.5% in August. Moreover, annual total revenue per available room (TrevPAR) in the city is typically strong due to a high ancillary spend derived from meetings and conferences, which are captured from the high concentration of corporate headquarters, government institutions and nongovernment organizations. However, due to the absence of this demand during August, at €67.19, the recorded TrevPAR in Brussels was more than 70% below the year-to-date average for the city, at €114.81.
“Unlike other cities in Europe, which are able to minimize losses during the summer months by filling gaps left by corporate demand with leisure visitors, Brussels’ profile as a tourism destination and appeal to the leisure market is relatively low,” says Jonathan Langston, managing director of TRI Hospitality. “The loss of high-yielding commercial-related demand during this period will understandably impact greatly on the profitability of hotels in the city.”
Further adding to the gloomy performance figures, short-term trough periods such as this will often cause a hotelier’s cost margins to rocket as they are not supported by adequate levels of achieved revenue. This is exemplified by payroll levels in Brussels this month, which at 55.3% of total revenue, were more than 15 percentage points above the year-to-date average of 39.1%.
Although it has undoubtedly returned in September, the drop in corporate and conference demand during the summer season has caused huge declines in profitability in a number of markets throughout Europe, according to TRI Hospitality. As well as impacting the level of demand—illustrated by hotels in Paris, which, at a room occupancy of 66.8% in August, were almost 10 percentage points below the rolling 12 month average—hotels are forced to accommodate a much higher proportion of lower-yielding leisure demand, impacting the achieved room rate.
In Rome, the achieved rate in the corporate sector, at €173.45 in the 12 months to August, is almost 50% higher than the value of leisure demand, at €116.87, as hoteliers slash prices in order to drive volume. And while corporate demand accounted for only 13.3% of total demand in August, the lower-yielding leisure and group sectors accounted for approximately 65% of total demand. As a result, the achieved room rate in Rome during August was more than €30 behind the city’s year-to-date average.
In contrast to the declines across much of Europe, thanks to major events such as the Grachtenfestival (45,000 visitors), Uitmarkt (500,000 people) and Gay Pride (a further 500,000 visitors), hotels in Amsterdam achieved the highest TrevPAR across all the markets polled at €175.46, fuelled by a growth of 23.8%. In addition to the growth in headline performance levels in Amsterdam being helped by a 7.5 percentage point increase in room occupancy, RevPAR levels in the city were boosted by a 19.1% increase in ADR. This was primarily as a result of a four-fold increase in the achieved rate in the non-discounted rack rate sector. Increases were also achieved in the leisure (10.2%) and group sectors (24.6%).
“Thanks to a strong calendar of events, Amsterdam avoided the pain felt by many of the cities across Europe during a best-forgotten August,” Langston says. “Heading into a characteristically busy period of commercial activity in September, it is essential that hoteliers in these markets regain focus in order to get back on track with the recovery.”