By Jeannette King
Recent data on the performance metrics of the Canadian hospitality market reveals a compelling story of resilience and recovery tinged with a note of warning on bottom-line conversion. Amidst global challenges, the industry has demonstrated its tenacity, with the Total Revenue Per Available Room (TRevPAR) metric taking center stage in this narrative.
In a comparative analysis spanning from 2019 to 2023, the trends underscore the transient nature of the setbacks faced in 2022 and highlight the industry’s subsequent rebound. Specifically, the TRevPAR metric, which provides a holistic view of a hotel’s revenue-generating capability, saw a dip in 2022 compared to 2019. However, 2023 witnessed a significant surge, with TRevPAR values not only recovering but also surpassing previous years. This notable bounce-back indicates a robust return of consumer confidence and spending in the hospitality sector.
The upward trajectory of TRevPAR is emblematic of the broader recovery patterns observed across other key performance indicators. While Gross Operating Profit Per Available Room (GOPPAR) and the Total Department Profit both recorded similar trends of a minor setback in 2022 followed by recovery in 2023.
But there are warning signs for the sector as the Gross Operating Profit Margin in year-to-date 2023 took a 0.5 percentage point knock compared with the same period in 2022. This suggests hoteliers are having to work harder to convert top-line revenue increases to bottom-line gains since marginal revenue uplifts should have a highly positive impact on bottom-line conversion.
In fact, the US$65.11 increase in TRevPAR YTD 2023 versus the same period last year delivers only US$21.77 of GOP or a margin of 33.4%. The impact of this is to dilute the GOP margin, which although suffering only a small percentage point decline should have posted a significant increase given the marginal revenue uplift.
For the remainder of the year, it will be crucial for hoteliers to keep a close eye on market trends, leverage cost benchmarking data in particular, and adopt more data-driven strategies to navigate the evolving landscape in order to deliver the highly prized bottom-line conversion which top-line increases should be capable of yielding.
