PREVIEWHotel Profitability Study 2019

PREVIEW© 2019 STR, Inc. All Rights Reserved. Any reprint, use or republication of all or a part of the Hotel Profitability Study without the prior written approval of STR, Inc. or STR Global, Ltd. trading as STR (collectively “STR”) is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This study is based on data collected by STR. No strategic advice or marketing recommendation is intended or implied.

Table of Contents

5 | STR's International Profitability Program

8 | Regional Overview Europe

11 | Europe Markets London

12 | Europe Markets Paris

13 | Europe Markets Brussels

14 | Europe Markets Barcelona

16 | Regional Overview Middle East & Africa

21 | Middle East & Africa Markets Beirut

22 | Middle East & Africa Markets Cape Town

19 | Middle East & Africa Markets Kuwait City

20 | Middle East & Africa Markets Dubai

24 | Regional Overview Asia Pacific

29 | Asia Pacific Markets Sydney

30 | Asia Pacific Markets Maldives

27 | Asia Pacific Markets Guangzhou

28 | Asia Pacific Markets Bali

32 | Regional Overview Central & South America

37 | Central & South America Markets Costa Rica

38 | Central & South America Markets Cusco & Lima

35 | Central & South America Markets São Paulo

36 | Central & South America Markets Panama City

39 | Contacts

40 | Glossary

+10.5%+4.3%

+2.9%

+4.9%

Central & SouthAmerica

+19.8%

Europe+7.0%

North America+2.7%

+7.2%Asia Pacific

-0.4%

Middle East& Africa

-0.7%

GOPPAR % change TRevPAR % change

13.2%10.8%

13.6%

20.2%

5.3%

6.1% 5.1% 6.2%8.0%

4.4%

6.7%5.4% 6.3% 7.4%

6.1%

0.6%

-0.8%

0.1%

-1.1%

1.4%

RoomsRevenue

Americas

Asia Pacific

Europe

Middle East& Africa

TotalRevenues

DepartmentProfit

GOP Total Labour

Overview of 2018 P&L Performance

Full-year 2018, consistent sample. Note: Percentage changes in USD Constant Currency. Table of Contents | 3

Rooms Revenue Total RevenuesDepartment Profit GOP Total Labour

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PREVIEWEuropeEurope registered a strong year in 2018 with Total Revenue per Available Room (TRevPAR) growth of 4.9%, which was mainly driven by increases in Miscellaneous Income (+18.1%) and Rooms Revenue (+6.7%), while Rooms expenses grew more slowly at 4.9%. Franchise Fees produced the largest growth (+10.8%) of Total Undistributed Expenses followed by Utilities, which grew 6.2% and can be more closely linked to rising occupancy levels, as well as prices. While Total Undistributed Expenses rose 4.5%, overall.

With costs increasing at a slower pace than Total Operated Revenue, Europe recorded a 7.0% Gross Operating Profit per Available Room (GOPPAR) increase between 2017 and 2018.

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120

Note: Percentage changes in Local Currencies. All individual market analyses in this report are in local currencies.

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GOPPAR % Change, Local Currencies

© Copyright STR 2019 Table of Contents

Europe TRevPAR +4.7%

Data is in EUR constant currency

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*Markets in this section.

Europe GOP Margin +36.7%

2017 % Change GOPPAR Ranking2018

€47.74

€49.10

€50.60

€52.45

€59.65

€63.96

€64.90

€44.09

€44.53

€42.49

€41.75

2

3

4

5

6

7

8

9

10

11

12

13

14

15

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Budapest

-4.4%

+9.7%

+66.7%

-0.1%

+19.1%

+1.9%

+1.9%

+24.4%

+8.8%

+7.0%

+146.6%

1 1

Warsaw

Budapest

Moscow

Madrid

Berlin

Brussels*

Istanbul

Rome

Paris*

Prague

Lisbon

Barcelona*

Amsterdam

Dublin

London*

Istanbul

Rome

Brussels*

Berlin

Madrid

Warsaw

Prague

Lisbon

Barcelona*

Paris*

Moscow

Amsterdam

Dublin

London*

-7.4%

+5.8%

+12.2%

+5.7%

€75.78

€77.78

€109.61

€110.74

Europe GOPPAR +6.8%PREVIEW

Several European markets reported double-digit growth for the year. Istanbul’s GOPPAR growth of 146.6% is a reflection of its currency devaluation and the city’s significant occupancy and ADR recovery, while Moscow’s 66.7% lift can be attributed to Total Operated Revenue growth that significantly outpaced Total Undistributed departmental expenses. It is also interesting to note that hotels were able to translate the high revenue growth over the World Cup period into profit. Brussels and Paris continued their recovery from the 2016 terror attacks, with respective GOPPAR increases of 24.4% and 19.1%. On the other hand, Barcelona experienced decline (-7.4%) as a result of political turmoil stemming from the Catalan independence movement. Despite the U.K.’s political climate and ongoing Brexit negotiations, London’s resilience resulted in a GOPPAR increase of 5.7%.

Revenue Breakdown

5.3% Other Opt. Dept.

3.0% Other F&B

2.6% Beverage

34.4% Food

51.3% Rooms

17.2% Rooms

39.1% F&B

4.8% Other Opt. Dept.

38.8% Undis. Expenses

3.4% Misc. Income

RevPAR KWD35.62-5.9%

TRevPAR KWD69.48 -7.4%

GOPPAR KWD27.21-9.7%

Kuwait CityOf the countries analysed in the MEA region, Kuwait was one of the bottom five performers. With oil contributing to more than half of the country's GDP, and tourism developing at a much slower pace than neighbouring GCC countries, there was a noticeable occupancy decline throughout 2018.

The market experienced a fourth consecutive year of TRevPAR and GOPPAR declines, falling to levels of KWD69.48 (-7.4%) and KWD27.21 (-9.7%), respectively. This was the result of a drop in revenue across all line items—the worst drop was in Other Operated Departments Revenue (-16.0%), followed by F&B Revenue (-8.5%) and Rooms Revenue (-5.9%). Total Departmental Expense dropped 11.0% with the sharpest decline in Other Operated Departments expenses (-26.7%), which was likely in reaction to the state of the market. F&B expenses were down 11.2%, possibly from hotelier efforts to streamline operations and control costs. On the other hand, Total Undistributed Expenses increased 3.4%, due primarily to Utilities (+23.2%) and Administrative and General (A&G) expenses (+6.0%). LPAR increased by 5.2%, resulting in a drop in Gross Operating Profit (GOP) margin of 2.4% (to 39.2%). This indicates that hoteliers were less able to convert revenues into profits.

However, there may be cause for optimism as government investment into quality infrastructure (Kuwait Vision 2035) and economic diversification outside of oil sectors, such as tourism, are likely to boost future performance.

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ExpensesBreakdown

Middle East & Africa

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© Copyright STR 2019 Table of ContentsPercentage changes in Local Currencies.

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USD, constant currency

-1% 1% 3% 5% 7% 9% 11% 13% 15%

0%

2%

4%

6%

8%

10%

12%

14%

Tokyo

Sydney

Singapore

Metro Manila

MelbourneMaldivesKuala Lumpur

Jakarta

Incheon & Seoul

Hong Kong SAR

Guangzhou

Delhi-NCR

Beijing

Bangkok

Bali

APAC markets GOP conversion

TRevPAR GOPPAR GOP margin

Incheon & Seoul22.9%

277.9163.76

Melbourne32.2%

208.1767.03

Metro Manila33.1%

145.8548.24

Tokyo33.5%

746.25250.21

Beijing34.7%

209.7972.74

Jakarta34.7%

112.9839.24

Kuala Lumpur35.5%

119.1242.29

Maldives38.7%

736.63285.38

Bali38.8%

170.2265.97

Singapore38.8%

308.97120.01

Delhi-NCR38.9%

135.0452.49

Bangkok39.2%

156.3861.31

Sydney39.5%

260.20102.71

Guangzhou39.6%

222.9488.34

Hong Kong SAR44.2%

462.66204.66

Key markets labourUSD, constant currency

TRevPAR % change

LPAR% change

Asia Pacific

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Note: Percentage changes in Local Currencies. All individual market analyses in this report are in local currencies. 120 -20

GOPPAR % Change, Local Currencies

PREVIEWCentral & South AmericaDespite the ongoing supply growth and socio-political unrest affecting the region, Central and South America recorded occupancy and ADR growth (+4.2% and +6.9%, respectively). This boosted Total Operated Revenue and Departmental Profit for the overall region, which reported Total Revenue per Available Room (TRevPAR) (+8.9%) and Gross Operating Profit per Available Room (GOPPAR) (+16.6%) increases.

Strong performance often means growing expenses, and in 2018, the region experienced a mix of both increased revenues and expenses. Other Operated Departments Revenue reported the strongest increase (+17.4%), followed by Rooms Revenue (+12.1%) and F&B Revenue (+4.1%). Expenses also grew, albeit at a slower pace than revenue, helping to drive a Gross Operating Profit (GOP) margin increase of 7.1%. Total Departmental Expenses increased 5.5%, driven by Rooms expenses (+7.7%) and Total Undistributed Expenses increased 7.2%, driven by Information and Telecommunication Systems (I&TS) expenses (+27.5%). Hoteliers managed to control Total Labour Costs per Available Room (LPAR), which increased only 4.5%. The strongest increases were seen in the I&TS expenses and Sales and Marketing (S&M) expenses, a trend seen across various countries in the region.

Central America reported a negative revenue comparison (TRevPAR: -0.5%), which was mainly the result of occupancy declines in Nicaragua and Panama stemming from political and social instability. Successful cost control helped to boost GOPPAR 2.6%. South America reported a more significant GOPPAR uplift of 19.8%, driven by 11.4% TRevPAR growth.

Table of Contents© Copyright STR 2019

Central & South America TRevPAR +8.9%

Data in USD constant currency

Central & South America GOP Margin +7.1%

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*Markets in this section.

2017 % Change GOPPAR Ranking2018

$21.49

$21.73

2

3

4

5

6

2

3

4

5

6+62.8%

+0.4%

1 1

Rio de Janeiro

Panama City*

São Paulo*

Bogotá

Costa Rica*

Cusco & Lima*

Rio de Janeiro

Panama City*

São Paulo*

Bogotá

Costa Rica*

Cusco & Lima*

+9.3%

+11.8%

+9.3%

+3.6%

$38.59

$46.14

$65.17

$76.40

Central & South America GOPPAR +16.6%PREVIEW

Rooms Revenue grew by an impressive 14.6%, which was the result of strong occupancy and ADR increases. It appears that government initiatives to boost the image of their countries as tourist destination (examples: Costa Rica and Guatemala) have helped hotel performance.

All the countries analysed in the region, except Chile, reported GOPPAR growth. Argentina recorded the largest increase of 88.1%, but that was mainly due to distorted ADR from the devaluation of the Argentine peso. Colombia ranked second with a 24.3% increase, driven by new international routes and a rebound from 2017 declines that followed high performance growth in 2016. Brazil came in third, as its hotels performed strongly in 2018 but were also affected by currency fluctuation.

As implied above, Chile was the region’s worst performer with a 2.3% decline in GOPPAR. The country might benefit from more stable economic and political conditions compared with surrounding countries, but the country was impacted by the overall economic conditions in South America, which resulted in a loss of tourist arrivals from key source markets like Argentina and Brazil.

OverviewSTR collects profitability data for 10,000 properties across the globe (including North America offering).

Built to help you make better business decisions, we offer a comprehensive set of annual reports with detailed breakdowns of departmental revenue and expenses, in-depth performance analyses, year-over-year comparisons and enhanced benchmarking offerings. STR's profitability database gives you the industry's most comprehensive, accurate and actionable data insights on hotel revenue and expenses.

STR's P&L Program

© Copyright STR 2019 Table of Contents

Profitability ProductsCustom Profitability Reports: Compare two years of aggregated revenue and expense data with properties in a competitive set of your choosing.

Comparative Profitability Reports: Directly benchmark two years of your property’s profitability results with an aggregated competitive set in one sight.

* Non-data providers can purchase Custom P&L reports for £900. Comparative P&L reports are not available to non-data providers.

PricingCustom Profitability Report: £500 (discounted for data providers)

Comparative Profitability Report: £550 (for data providers only)

Learn moreMore information on our P&L program can be found here.

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STR P&L Coverage

Table of Contents | 11

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EuropeLondon (International Headquarters)

+44 (0) 207 922 1930 profitability@str.com

Middle EastDubai (MEA Regional Office)

+971 (0) 557 701202 profitability@str.com

Asia PacificSingapore (APAC Regional Office)

+65 6800 7850 profitability@str.com

North AmericaHendersonville, TN (Corporate Headquarters)

615 824 8664 host@str.com

Central & South AmericaColombia (CSA Regional Office)

+57 (1) 5088965 profitability@str.com

© Copyright STR 2019 Table of Contents

Lucie Geffroy Junior Analyst - P&L, Research & Analysis

Letizia Rossi-Espagnet Research Coordinator, Research & Analysis

Denise DeGirolamo Lead Graphic Designer

Gary Stringer Content & Media Executive

Contact

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Nick Minerd Senior Director, CommunicationsPREVIEW