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Higher revenue doesn’t necessarily equate to higher profit
Room revenue’s contribution to total revenue varies widely across countries. Markets in Asia and the Middle East usually produce a lower room revenue ratio-to-sales as they generate more revenue from F&B outlets than European markets.
While room revenue typically yields far higher profits than other departments, it is interesting to note that markets with a higher room revenue ratio-to-sales does not necessarily show the strongest profit conversion. Let’s focus on Germany, where Luxury class hotels have produced the highest room revenue of these markets but is evidently less effective at converting it into profit. The country’s gross operating profit (GOP) margin is lower than all but one of the key global markets analyzed here.
This analysis highlights the need for perspective. Without the comparison and context in this case study, properties, management companies, and investors wouldn’t have the full picture needed to inform their strategies.
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