U.S. hotels hit 65% of pre-pandemic profitability levels

Hotels have had a very strong summer so far, with strong transient demand and commercial demand starting to pick up.

This has been particularly beneficial for hotels in the top 25 U.S. markets, where profit levels have improved markedly from dismal pandemic performance.

The latest data from STR, CoStar’s hospitality analytics firm, shows the top 25 markets are now at 65% of year-to-date 2019 gross operating profit per room levels and are just seven percentage points lower than 2019 year-to-date. gross operating margin. Additionally, all of these markets year-to-date are over 50% of 2019 levels in terms of total revenue per available room and over 24% of GOPPAR’s 2019 levels.

Markets still leading include Miami, Orange County, Phoenix, Tampa and San Diego; and transient demand drives high performance. These top five markets are above TRevPAR levels since the start of 2019 and four of the five are above GOPPAR levels since the start of 2019. TRevPAR year-to-date in Miami is $441, or 128% of its 2019-date-to-date level, and Miami’s GOPPAR is $222, or 152% of its 2019-date-to-date level. Miami’s GOP margin is 50% year-to-date, 8 percentage points higher than in 2019, but manpower per available room is only slightly lower than it was in 2019 since the start of the year. start of the year at $100, down from $101.

The markets at the bottom of the list also remained relatively stable: San Francisco, Atlanta, Seattle, New York and Minneapolis. Although these markets are at the bottom of the top 25 list, they all made month-over-month improvements. GOPPAR in New York hit $125 in May, the highest in 12 months. San Francisco is at 51% of its GOPPAR levels since the start of 2019, and all other markets are at more than 80% of 2019 levels.

We also don’t expect these markets to stay at the “bottom” any longer, as hub cities, such as New York, San Francisco and Seattle, have experienced the largest increases in demand for hotel rooms since the United States lifted restrictions on international travel. The further growth of hub cities and top 25 markets will also be a major factor in revitalizing revenues and profits for these markets. It will also hopefully help bring back large meetings and groups, as catering and banquet revenues are still down 33% year-to-date.

Another ongoing problem for hotels is the shortage of manpower, as managers have had to find more flexible solutions to attract and reach employees. Labor cost per available room for the top 25 markets is only 83% of 2019 levels to date and has not exceeded 90% in the past year, reflecting lower employment levels rather than cost savings. This can also be seen in labor margins, as they are higher than they were in 2019 – 33.4% versus 32.7% – for these major markets, even though labor costs -work per available room are lower than 2019.

STR will continue to monitor the recovery of profitability in the top 25 markets.

Raquel Ortiz is Director of Financial Performance at STR.

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