The global hotel industry is experiencing mixed fortunes as it navigates the post-pandemic landscape. In the United States, the Gross Operating Profit (GOP) margin has seen a year-on-year (YOY) decline of three percentage points (ppt), primarily due to a three ppt increase in total labor cost margin and a 0.5 ppt rise in utilities cost margin. This has led to a 1% ($1.25) YOY drop in Gross Operating Profit Per Available Room (GOPPAR).
Undistributed expenses, including Sales and Administration & General (A&G) expenses, have surged by 12.9% YOY, reversing the savings made in these areas during the pandemic. Specific cost items such as in-room supply expenses per occupied room (POR) and housekeeping labour cost POR have risen by 3% and 8% respectively.
The Luxury Segment has been hit hardest, with a five ppt drop in GOP margin due to a slight decrease in Average Daily Rate (ADR) and higher expenses, including a four ppt increase in labour cost margin. The Full-Service segment saw a 2.4 ppt drop in margin, but a $5.80 increase in GOPPAR due to revenue growth exceeding $25 PAR. The Select-Service segment experienced a marginal decline of 0.4 ppt in margin, but a $6.10 increase in GOPPAR due to revenue growth.
Despite a challenging start to the year in Europe due to high energy costs and reduced demand, the last three months have shown improvement. The GOP margin has risen by one ppt compared to the same period in 2022, leading to an increase of just under EUR 14 in GOPPAR. This growth has managed to offset a 24% increase in utility costs and a 20% increase in labor costs. However, Germany's recovery is lagging behind other major countries due to slow return of demand and inflation challenges.
In the Asia-Pacific (APAC) region, most regions have experienced double-digit demand growth YOY, thanks to the return of Chinese travelers and the opening of borders in mid-2022. All segments have now recovered to 2019 GOP margins, with Select-Service hotels seeing profits grow by 2 ppt. GOPPAR has increased by $40 YOY. However, hotels in APAC have seen a 10% drop in Sales & Marketing expenses, but these costs have significantly increased over the last three months (25% YOY increase).
In the Middle East, after a robust performance in 2022, hotels experienced a drop in GOP margin of 3.5 ppt. Despite being less exposed to energy cost increases, a 15% rise in undistributed expenses per available room and a 1.5 ppt increase in labor margin have offset any top-line growth.
Today, the global hotel industry can be seen grappling with rising costs and varied demand across regions. The industry's ability to adapt to these challenges will be crucial in determining its recovery trajectory in the post-pandemic era.