As both passenger numbers and flights fall, what is the effect on airport hotels? Data from STR Global, the leading provider of market information to the world’s hotel industry, shows interesting differences in the performance of the hotel markets at London’s two major airports, Heathrow and Gatwick, during recent months.
Being the least worst is never a high accolade, but in the face of a very tough market the performance of Germany’s main cities is commendable. The May 2009 edition of the European Hotel Review, published by STR Global, the leading provider of market information to the world’s hotel industry, shows German cities taking the top five positions for annual change in revenue per available room (RevPAR) for the year-to-May 2009.
The impact of the recession on UK hotels lessened slightly in May, according to the latest HotStats survey by industry experts, TRI Hospitality Consulting. The rate of decline in occupancy is slowing. For the first 5 months of this year occupancy at UK hotels was down 3.7 points but for May it was down 2.7 points. The decline in rate was slightly more but this was not enough to make the decline in RevPAR worse. RevPAR was down 10.9% in May and down 11.8% for the first 5 months. Most importantly, profit, as measured by income before fixed charges, was down 18.1% for the first 5 months but down significantly less at 12.6% for the month of May.
In depth analysis by Deloitte, the business advisory practice, reveals a clear trend in improvement in UK hotel performance over the last five months. Whilst revenue per available room (revPAR) is still negative, the pace of decline is reducing and some markets are actually showing gains on 2008 numbers with strong leisure demand driving up weekend occupancies and revenues. There is also a trend of improving performance in the weekday corporate business market in London.
Average room rate performance for Germany’s cities so far this year varies dramatically according to data from STR Global, the leading provider of market information to the world’s hotel industry. Of the 17 city markets in the Federal Republic covered by STR Global, only four show positive, albeit modest, year-on-year ADR growth for the first four months this year: Rostock, Leipzig, Cologne and Dortmund. (See chart below.) Rostock leads the way with a 3.3-percent increase.
Whilst the circumstances are different, data from STR Global, the leading provider of market information to the world’s hotel industry, shows that Germany’s hoteliers might be holding their nerve more than in the previous recession. The last German recession, defined as two or more consecutive quarters of declining Gross Domestic Product (GDP), occurred between the last quarter of 2002 and continued until the second quarter of 2003. Revenue per available room (RevPAR), a measure of hotel operating performance, was already falling well before this as external factors such as 9/11, the Iraq War and SARS took effect.
According to the latest city review by Christie + Co, using data provided by STR Global, Hamburg hotels recorded a 3.1% decrease in RevPAR during the first quarter of 2009 compared to the same period in 2008. Preliminary figures for April suggest that this downward trend is continuing with a further 18.2% drop in RevPAR compared to the previous year. Hamburg is the second largest city in Germany and ranks amongst the country’s most popular city break destinations, attracting a balanced mix of business and leisure travellers. Home to the second largest harbour in Europe, Hamburg is often referred to as ‘The Gateway to the World’ and is also considered the German capital of musicals. In addition, the borough of St. Pauli, including the famous Reeperbahn area, as well as the Hamburg Harbour Birthday Festival and many international trade fairs and exhibitions, attract millions of business and leisure guests annually.
To say the market has been extremely tough over the last few months would be a massive understatement. We can see the effects that the banking crisis is having, the wider implications of an economic slowdown in the UK and the knock on for our own industry. As clients you have been very supportive of us in the past, either when we were The Bench or HotelBenchmark and now as STR Global and we want to try and help as much as we can. We are sitting on a large amount of quality market information, and whereas you have the ability to pull a lot of data through our website, you probably haven’t had the time to. In all market conditions, whether growing or contracting, we need to look at the specific market segment because they all behave differently.
indicators show UK hotels, of all shapes and sizes are in for a rough ride over 2009, with nearly 200 per cent more hotel companies becoming insolvent in Q1 2009 than in the same quarter last year. Up to this point we have mainly seen smaller, standalone hotels, with only a few exceptions of hotel companies where debt levels have become unsustainable as demand and profits have declined. However, new PricewaterhouseCoopers LLP insolvency statistics show the quarter to quarter rate has slowed with a 20 per cent increase in insolvencies from Q4 2008 to Q1 2009 - the highest increase being over 100 per cent from September to December 2008.
Hotels across the UK experienced further falls across occupancy, room rate and rooms yield in March, according to monthly figures released today by PKF Hotel Consultancy Services. Direct year on year comparisons are hard to make when Easter falls in different months, which is the case between 2008 and 2009, but nonetheless the figures suggest that the economic downturn continued to affect the capital.
London profit down by 16 per cent in Q1 2009. The UK chain hotel industry experienced heavy falls in profit and revenue during the first quarter of 2009, according to the latest HotStats survey by TRI Hospitality Consulting. In London, daily profit - expressed as income before fixed charges (IBFC) – fell by 15.7 per cent to £45.62 per available room compared to the same three months a year earlier. Room revpar decreased by 10.1 per cent to £77.58 due to a 5.5 per cent drop in average room rate and occupancy down by 3.7 percentage points to 72.9 per cent.
London profit down by 17 per cent. The profitability of London chain hotels fell by 16.9 per cent in February, according to the latest HotStats survey by TRI Hospitality Consulting. London hotels generated daily profit – expressed as income before fixed charges (IBFC) – of £47.75 per available room compared to £57.46 the same month a year earlier. Total revenue and room revenue were down by 11.3 and 10.4 per cent respectively in London. Average room rate dropped by 6.6 per cent to £108.15 and occupancy was down 3.2 percentage points to 74.7 per cent.