Travel Restart - Where Are We Today?
With vaccination shares reaching increasingly higher levels across major parts of the world, travel is mooted to begin its long-awaited restart and recovery - an ideal time to look at some of the implications for hotels and to understand the financial data emanating from parts of the world where hotels have long begun recovering. If you want to track the global vaccination levels, have a look at Our World In Data’s interactive vaccination chart HERE.
Who is best vaccinated?
Before we dig into the details of hotel performances, let’s take a quick look at some of the countries and regions that are at the forefront of vaccination success, and as to how that might impact regional travel patterns.
With almost 63% of its population having received at least one dose, Israel has been among the fastest when it comes to pushing for herd immunity. Having said that, vaccine uptake has been fairly stagnant since mid-March. The biggest jump was recorded in Mongolia, where vaccination uptake has gone from only about 20% of the population on April 25 to over 56% a month later.
When it comes to potential cross-border travel patterns, the European region is showing the most promise, with the UK (56%), Hungary (52%), Germany (41%), Italy (36%) and France (35%) making up 5 of the 11 most vaccinated countries, as per Our World In Data. As a result, pan-European travel is unsurprisingly heading towards some sense of normality.
For example, Italy has been open to quarantine-free travel from EU countries, the UK and Israel since May 16. What’s more, those that take “COVID-tested” flights from the US will also be allowed to enter the country without quarantine requirements. You can get more detail on Italy-specific travel data and implications HERE. As per Franco Grasso’s chart below (March 23), occupancy levels in Italian cities for instance, had already been on the rise towards 2019 levels, albeit at a significantly lower RevPAR rate. The May 16 changes will surely further boost those numbers.
While the recovery across Europe will certainly see tourism boosts in countries other than Italy, including the likes of France, Germany, the UK and others, Mongolia seems to have become something like an Asian wildcard. Mongolia now accepts travellers from countries that benefit from visa exemptions (HERE’s a list of those 25 countries), and showing a negative PCR test (within 72 hours of departure) will get you in and you will be subject to a 7-day quarantine unless you happen to be a national of any of the above countries AND are fully vaccinated. In such a case, you get to enter the country quarantine-free. And guess what? There’s lots of space in Mongolia, so social distancing won’t be hard to implement.
How are the KPIs coming along?
The US hotel industry is seeing some particularly promising recovery data. In April, GOPPAR (Gross Operating Profit Per Available Room) hit its highest point since February 2020, now standing at $35.45, an increase of over 235% year-on-year. As per Hotstats (May 27), “leisure travel was almost 50% of total traveler mix in April, a 22.9 percentage point uptick over the same time a year ago”. That’s a clear sign of pent-up demand which is gradually being released across the leisure travel segment.
Having said that, the GOPPAR performance in Europe is arguably disappointing. While every other major region is back in the green (most notably the Middle East with an increase of 357% to $37.32), European hotels still have a negative GOPPAR performance of -€8.20. Nevertheless, that still represents a year-on-year improvement of 51%. Given that the challenge to financial performance was mostly posed by occupancy levels that still remained below 20% in April 2021, the lifting of EU-wide travel restrictions will likely see a GOPPAR return to positivity during the European summer of 2021. This is particularly viable, as the cost of labour (Labour PAR) has only increased by 20% during the same period, with €18.90 per available room representing the lowest figure across all global regions.
TRevPAR is on the money!
Across all relevant hotel KPIs, it’s arguably TRevPAR that offers the biggest business opportunity for hoteliers over the next couple of years. TRevPAR (Total Revenue Per Available Room) has already seen some significant increases year-on-year, with US-based hotels registering an average uptick of 752% to over $116 per available room! Having said that, it’s Middle Eastern hotels that take the cake in that area too, scoring more than $122 per available room.
At the other end of that spectrum, European hotels scored a disappointing €28.85 in terms of TRevPAR. While that is an underwhelming figure, it also means that there is a great amount of room for growth from the likes of ancillary services. European hotels have always been more focused on RevPAR than on the potential of TRevPAR, as per the growth areas depicted in the Hotstats chart below.
However, the pandemic will force hoteliers to shift focus to other sources of revenue than the arguably “standard” RevPAR, as visitor numbers are forecast to remain significantly lower than in pre-pandemic years for a while. In other words, there will be a harder fight for “heads in beds”, and ultimately, fewer guests will end up in hotel rooms, forcing hoteliers to make more from each “head” and grab a larger share of the guest wallet.
That’s where Portier Phones come into play
TRevPAR has always been our bread and butter. We have helped many hotels lift the revenues they generate from ancillary services including the spa and F&B. For example, our push messaging feature has consistently driven sales conversion rates of 7%, representing the highest conversion rate of any marketing methodologies hoteliers deploy today.
With that in mind, the Portier Platform has delivered an incremental revenue increase of more than $2,000 per room per year to the likes of Banyan Tree Hotels. Ultimately, our platform works in a way that it encourages your guests to take action on sellable ancillary services at the right time, leading to an increase in guest spending that is unparalleled in the industry.