The European hotel industry led the world last year with a 16 per cent growth in operating profits, a new survey says.
Profits growth in Asia was 14 per cent while in Middle East, growth in dollar terms was restricted to three per cent, according to the results of an annual profitability survey announced by Andersen, the global professional services firm and leading provider of hotel performance data outside North America. With the two biggest global economies (Japan and the United States) in or near recession, businesses around the world are looking to their profitability and liquidity indices with more dedication than at any time since the early 1990s, Andersen said. Hotel owners and operators are turning from a focus on building market share through a commitment to building revPAR penetration to a focus on building IBFC (Income before fixed charges) penetration and converting IBFC into cash, it said. Almost 1,000 hotels in key markets across Europe, the Middle East and Asia Pacific contributed data to this year's publication, making it by far the most representative survey of global hotel profitability trends. The survey showed that IBFC per available room in 2000 grew in all surveyed European cities except Budapest, Vienna, Stuttgart, Cardiff, Glasgow and Edinburgh, when measured in euros. Overall growth in Europe averaged an amazing 16 per cent measured in euros. The fastest rate of growth was in Athens, where profitability rose by an astounding 47 per cent. The city with the highest level of IBFC per available room was London with 45,654 euro ($41,964), well ahead of its nearest rival Paris, where profitability reached 40,142 euro ($36,896), although Paris managed to close some of the gap during 2000. By contrast, IBFC per available room was less than 15,000 euro in Leipzig, Vienna, Brussels, Hamburg and Stuttgart. German hoteliers clearly face a much more challenging survival environment than their colleagues in Paris or London, Andersen said. And with IBFC per available room in the UK averaging 29,271 euro compared to the German average of just 12,193 euro, there is perhaps little surprise that it is the UK hotel industry that has been making the headlines in industry consolidation moves (e.g. Six Continents plc, Hilton Group plc). In the Middle East, profits remained largely flat in dollar terms. Exceptions included Istanbul where IBFC per available room grew 56 per cent in 2000 from the lows caused by the reaction to the 1999 earthquakes, as well in Manama where profits grew 29 per cent. But there remains much to be done to make the Middle East hotel scene attractive to in-bound investors - IBFC per available room in this region is still well below the average attained in Europe. In Asia Pacific, profitability as measured by IBFC per available room grew in real terms in all cities surveyed with the exception of Melbourne. The highest rate of growth was in Kuala Lumpur, but notwithstanding this, hotels in Kuala Lumpur and Jakarta (together with Leipzig) are the least profitable of all the cities surveyed. Hong Kong hotels generate the most IBFC per available room and this is the only Asian city to achieve European levels of profitability. Overall, the Andersen annual review of hotel profitability shows that 2000 was a year of significant progress for hotels in almost all of the cities surveyed. In many cases, the growth in profitability was double digit, well ahead of inflation, when measured in euros. "As the investment community seeks to find appropriate homes for the money that would have gone into the dot.com community, there must now be a good opportunity for the industry to claim more than its fair share as it seeks in 2001 to emulate the year 2000 performance," Andersen said.