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1. US Labor Costs Put Pressure on Hotel Profits
CoStar profit-and-loss data for June 2023, released on Aug. 4, shows the cost of labor in the hotel industry has notably affected U.S. hotel gross operating profit per available room, which “fell year over year for a second consecutive month.”
Raquel Ortiz, STR’s director of financial performance, said labor costs have continued to increase year over year, currently close to three times the rate of total revenue. She added that despite the decline, “the GOPPAR level was improved from May, and with cooling inflation, real GOPPAR and total revenue per available room were up month over month for the first time since March.”
2. Flight Delays Add to European Travel Woes
Strike action across Europe and wildfires in certain countries are not providing global visitors with much confidence, but the Wall Street Journal reports the biggest concern is over flight delays, which are at the worst level ever.
The newspaper added that “more than a third of flights were delayed by 15 minutes or more between May 1 and Aug. 1 at Europe’s 50 biggest airports. … That compares with a delay rate of about 29% in the same period last year and almost 24% in 2019.” There are, however, more flights in Europe. “The average number of daily flights across Europe has reached more than 27,000 this year, up 12% versus 2022,” it said.
3. Apple Hospitality REIT Raises Full-Year Guidance
U.S. real estate investment trust Apple Hospitality REIT has raised its revenue per available room guidance for full-year 2023, and continues to focus growth of its ownership portfolio on midscale and upper-midscale hotels, reports Hotel News Now’s Dan Kubacki.
President and CEO Justin Knight said during an earnings conference on Aug. 4 said the firm’s new RevPAR guidance growth is now between 4% and 8% for the year, an increase of both the low and high ends of the range by 100 basis points from prior guidance. He said the firm also has raised its outlook for comparable hotel adjusted hotel earnings before interest, taxes, depreciation and amortization margin percentage by 10 basis points on the high and low end.
4. 'Solid Evidence' Required To Lower UK Interest Rates
Andrew Bailey, the governor of the Bank of England, the United Kingdom’s central bank, said interest rates, currently at a 15-year high, will not be lowered until he sees “solid evidence” that inflation is lowering, too, according to the BBC.
“What I mean by solid is that people can rely on it and say, I'm going to build that into my expectations, so that when prices are set, wages are set, people say, yes, I get it, inflation’s coming down,” Bailey said.
On Aug. 3, the bank increased interest rates from 5% to 5.25%.
5. China Plans Relaxation of 'Hukou' Rules
China is planning to ramp up plans to relax rules on internal migration — the ability of citizens to settle in smaller cities — to help boost its economy, which has not rebounded since the end of the pandemic, according to the Guardian. Plans to lower the bar for obtaining an urban "hukou," or "household registration" certificate are to be fast-tracked to “encourage rural migrants to settle permanently in the cities and contribute more to the urban economy,” the newspaper reports.
Approximately, 292 million people, or one-third of the working population, are rural migrants working in China’s cities, but the majority do not have the prized certificate and thus are unable to benefit from discounts for social services and are not permitted to buy property. Generally, this results in them returning to their villages.