The global hotel industry faced a range of challenges in 2023 that had a significant impact on operations and overall profitability. The year started with several natural disasters (Japan earthquake, Maui forest fires, China floods), political issues also troubled the sector (Ukraine, Gaza, Houthi) and we cannot pass by without mentioning the COVID19 pandemic and its impact.
EUROPE
2023 was a banner year for European hotels, having bypassed 2022 post-COVID. While revenue growth has slowed since the recovery at the beginning of the year, European hotels are still in a better position than they were 18 months ago. Not all aspects of the situation are so favourable, with high inflation, rising energy prices, supply chain issues and rising labour costs weakening growth. There is also an ongoing challenge around F&B profitability, as this segment has seen profits fall across most parts of Europe. The issue is a priority and hoteliers are working to balance the changing needs of guests while maintaining F&B profitability. Wellness revenues, including spas and health clubs, are doing well and replacing a portion of F&B profits, increasing guest turnover and guest spending. Looking ahead, revenues are slowing, but there are positive signs that costs are also falling back to pre-pandemic levels.
AMERICA
America has seen a stabilisation in 2023. Year-end results were already slightly higher, in nominal terms, than in 2019, but performance was not consistent across the continent. In the pre-season, although double-digit growth, revenue and profit per room showed more modest increases of 12.6% and 12.7% respectively. “Following strong growth in US resorts during the pandemic, US travellers have returned to Europe, resulting in a slowdown in US resort growth. In 2024, assuming current macroeconomic conditions will continue, US travel patterns will normalise and US resorts will retain their fair share of US travel.” The key factor that has challenged profitability in the US has been the continued rise in labour costs. Some of the increase in labour costs is a result of staffing levels recovering and service levels returning to normal, but it is also true that many hotels are still facing labour shortages, which is also caused by how much more expensive each hour of labour has become. Increasingly, third-country workers have had to be employed, leading to a significant change in the composition of the workforce (from 2.7% to 5.3%). Overall, the data shows that overall revenue, expenditure and profitability trends have normalised, but let’s not forget that guests have changed in terms of their behaviour and preferences, technology is evolving rapidly and the economic environment in which hotels are selling has changed a lot.
MIDDLE – EAST
The Middle East has faced many challenges, but 2023 has also presented several opportunities for growth, making it a dynamic year for hotel performance in the region. The pace of the global recovery from pandemic COVID-19, geopolitical changes and changing consumer preferences have played a key role in shaping the hotel industry’s landscape. The situation varies from region to region and the recovery has not been consistent. However, all classes have seen growth, especially luxury and ultra-luxury hotels, where profit-margins have increased by more than 10 percentage points. On the cost side, and in particular on the labour side, the region has shown very positive results in 2023, as margins have remained significantly lower than in the pre-pandemic period, and even slightly decreased on an annual basis. Despite these positive trends, hotels in the Middle East faced challenges that required rapid adaptation. Fluctuations in oil prices, economic uncertainties and the lingering effects of the pandemic have continued to challenge the industry. Some hotels have had to reassess their business models and focus on cost management, innovative marketing strategies and diversified revenue streams.
ASIA – PACIFIC
The region performed well in 2023, but performance levels were not consistent. South Asia clearly stood out, particularly in the peak season between mid-November and February, with volumes almost doubling compared to the average for the rest of Asia. A comparison of market segments was interesting during the post-COVID boom years, with extended-stay and select-service offering the most stable returns, while the luxury category far outperformed the GOPPAR returns of all other segments. Commissions and booking fees remain a hot topic of discussion in the region as OTAs continue to reduce direct bookings. Some of the big brands have leveraged their size and power to negotiate lower percentage offers and are investing heavily in loyalty programs and their own digital marketing to drive more direct bookings and lower commissions. Within sales and marketing costs, however, commissions will again account for the biggest increase between 2019 and 2023. As APAC enters a more stable 2024, the focus will be on recapturing more of the MICE business, attracting more business travellers. (HOTSTATS Global Hotel Performance Review)