Ljubljana hotels achieve big increase in RevPAR – Translation of an article that appeared in Finance, Slovenia’s daily financial newspaper, on Tuesday 20th February 2018
By Jacqueline Stuart
What is RevPAR?
RevPAR is the most important metric used in the hotel industry. RevPAR is revenue per available room, calculated by multiplying the average daily rate achieved by the average annual occupancy. You might assume that most guests pay broadly the same for their room, but this is far from the truth. Room rates vary depending upon the source of business. Typically conference organisers pay the most for rooms, and coach tour operators the least. Hotel guests come through many market channels including online travel agents, walk ins, tour operators, long stay and others. Successful hotels optimise their yield by balancing scarce high paying guests, with occupancy generated by more plentiful lower paying guests.
10 Ljubljana hotels now contributing data
STR Trends have published their end of year report for 2017, and it is good news for Ljubljana. STR now collects data from 10 hotels in the city, including all the internationally branded properties.
STR reports on 9 regions worldwide, all of which saw an increase last year with the exception of the Middle-East, which was down 5.6%. All other regions saw increases of between 2.7% and 5.6%, with the exception of Northern Africa, which was up by an incredible 37.9%. Western Europe saw an increase of 2.2%, Northern Europe 4.7%, Southern Europe 9.5%, and Eastern Europe 10.8%.
Ljubljana now performing nearly as well as Prague
In Eastern Europe Prague performs best, with 80.1% average occupancy, and an average daily rate of 88€. The good news is that Ljubljana is not far behind, with average occupancy of 74%, up 4.3% on the year before, and an average daily rate of 81.5€, up an amazing 12.9% year on year.
Occupancy in Ljubljana increased by about 5% year on year in the first 8 months of 2017, then decreased slightly in September. The last 3 months of the year saw no change on the year before.
The average daily rate saw a small increase in the first four months of the year, then a large increase of over 20% between May and October. November saw little change on the year before but December saw a large increase.
What is driving this change?
What has allowed Ljubljana hotels to charge more than 20% higher room rates in the peak season in 2017? The more transparent the market, the easier it is for hotels to maximise their yield. If most hotels in the city are fully booked, room rates skyrocket. In some more mature markets, hotels trade information about bookings which allows them to raise rates as occupancy increases. The problem in Ljubljana has been that until recently, there was no information available to hotels about their competitors, and information sharing was uncommon. It is very hard to maximise the yield of a hotel if the Sales and Marketing team are working in the dark, with no information on bookings in competitor hotels. STR Trends collects information from 10 hotels and reports on the market as a whole, in order to protect the confidentiality of individual properties. This gives each hotel team valuable market knowledge and the confidence to raise room rates in busy periods.
Business Vs Leisure guests
Ljubljana hotels have never enjoyed the same level of business trade as those in most other capital cities. Slovenia is so small that Slovenes travelling to Ljubljana on business can easily drive home at the end of the day. Business travel has been limited to travellers from overseas. It is really heartening to see from the latest STR report that midweek occupancy and average daily rate has grown more than that of weekends. This is thanks to the booming MICE business; meetings, incentives, conferences and events.
Embracing the local market
AccorHotels is the largest hotel company in Europe. CEO Sebasiten Bazin said ‘Ninety-nine percent of what we have done for 50 years has been based on the guy coming from outside of town, a traveler, from a different city, from a different country, which I think is interesting, but not too smart. Because we missed a population which is 100 times greater and better and easier: The guy living next door. The local inhabitants. They live around the hotel, or they go to an office around the hotel, and 90 percent of them never dared coming into the property, because they’re fearful that we’re going to be asking, ‘What’s your room number?’ They don’t need a room, but they may need a service.”
Maybe this is the moment for hotels everywhere to reclaim the role they once had as community centres. It is interesting to see how the new Intercontinental Hotel has made an effort to reach out to inhabitants of Ljubljana. The B Restaurant and Bar organises regular drinks and dinner events for locals. The Slon too organises a new year’s party for Ljubljana’s business community, and provides a valuable meeting point in the centre of the city.
The effect of RevPAR on profitability of hotels
The great thing about improved RevPAR is that the benefits go straight on the bottom line, with no associated costs. Increasing RevPAR is literally like printing money for hotel owners. Higher profits often have a wonderful impact on hotels. More money is available to train staff and carry out refurbishments. Confidence to invest in the future of the property grows.
A new era for hospitality in Slovenia
The benefits of a more transparent hotel market cannot be overestimated. Any investor wanting to build a new hotel in Ljubljana now has access to solid, credible market data from STR. Valuations of hotels will be more accurate now valuers can properly assess whether a property is underperforming or outperforming the market. Banks will be able to lend to hotel owners and developers in the confidence that they properly understand their business. Overseas investors will have a far greater understanding when considering acquisitions in Ljubljana. So far, STR can only report on Ljubljana as there is insufficient participation from hotels elsewhere in Slovenia. We have to hope that hotels in other parts of the country will be inspired by the success of Ljubljana, and join the revolution.
Jacqueline Stuart is a Director of S-Invest d.o.o.
