![]() ![]() However, it also gambles on the opportunity that locking in customers for longer stays will result in a business that would have not otherwise occurred. ![]() By requiring guests to stay a minimum number of nights, a hotel runs the risk of losing business to hotels willing to offer greater flexibility. ![]() This information also helps determine if and how much of a discount the hotel should offer for soon-to-be unoccupied rooms for an evening. In theory, this allows for hotels to charge higher prices during peak demand seasons and lower prices during slower seasons. Demand for hotel rooms wax and wane, and hotels must be aware of what is going on around them to better understand consumer trends. Lessons have been learned during difficult times. However, as we have observed during the first six months of 2020, as well as during the past two recessions, cost control measures have tended to linger after periods of depressed performance. As occupancy levels increase, managers will be challenged to continue to suppress operating expenses. This typifies the fixed nature of most costs within the undistributed departments.ĬBRE projects lodging performance to improve during the second half of 2020. ![]() It was a different story in the undistributed departments where expenses declined by 32.6 percent PAR, but rose a strong 33.8 percent POR. Within the operated departments, expenses PAR declined by 47.5 percent, but increased just 4.3 percent POR. When analyzing the cost data for the operated departments versus the undistributed departments, the impact of fixed expenses becomes evident. However, measured on a per-occupied-room (POR) basis, operating expenses rose 16.8 percent. The 49.7 percent decline in occupancy for the sample did contribute to this decline. What the greater than expected GOP margin does reveal is the extent to which hotel managers have adjusted their operations and demonstrated the ability to control the variable costs for which they have the greatest influence.įrom the first half of 2019 to the first half of 2020, operating expenses through GOP have declined by 41.2 percent on a per-available-room (PAR) basis. Further, for the owner, earnings before interest, taxes, depreciation and amortization (EBITDA) is down 103 percent, implying a negative cash flow before debt service. Of course, the greater levels of operating efficiency do not provide enough joy to overcome the pain of an average 79.1 percent year-over-year decline in GOP. Using information from CBRE’s Trends® in the Hotel Industry database, at 39.8 percent, hotels have historically averaged a GOP margin of 11.6 percent. hotel occupancy is projected to be 39.8 percent. Based on CBRE’s August 2020 forecast for the entirety of 2020, U.S. This was achieved at an occupancy level of 36.6 percent. For the sample, the year-to-date gross operating profit (GOP) margin was 18.2 percent. hotels are on track to achieve profit margins better than those observed at past comparable levels of depressed occupancy.ĬBRE collected June 2020 operating statements from a sample of approximately 450 diverse hotels across the country. Through the first six months of 2020, U.S. hotel operators in 2020 have demonstrated their historical ability to adapt to difficult market environments and squeeze the greatest efficiencies from their operations. Faced with the greatest declines in revenue since the 1930s, U.S. ![]()
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