Europe's Hotel Industry: The Drop In Business In 2002 Incites Certain Operators To Be Prudent In Terms Of Development - MKG Reports
In Europe, the preliminary data of MKG Consulting for the year 2002 show a drop in the RevPAR by 1.0%. The increase in average daily rates by 1.4% is not enough to compensate for the drop in occupancy rate to as far as 1.7 points. This performance nonetheless translates as a slight improvement with respect to 2001 (-2.6% at the end of the preceding business year).
- The year 2002 closes with a drop in the RevPAR by 1.0% in Europe.
- France does better than Germany, the United Kingdom or Spain at end 2002.
- Budget categories resist perfectly, the 4* a bit less.
- Fewer buyouts in 2001, the supply of the top 10 European groups grows by 3.7% versus 17.6% the previous year.
- French chain Accor strengthens its position as number one hotel group in Europe (+13.2%). The hotel supply of the American groups Marriott and Choice progress by more than +5%.
In Europe, the preliminary data of MKG Consulting for the year 2002 show a drop in the RevPAR by 1.0%. The increase in average daily rates by 1.4% is not enough to compensate for the drop in occupancy rate to as far as 1.7 points. This performance nonetheless translates as a slight improvement with respect to 2001 (-2.6% at the end of the preceding business year). Hoteliers did not give in to panic in 2002 and generally opted for slightly increasing rates.
A positive fact is that the budget segments (0/1/2*) confirm their excellent health in 2002 with a RevPAR up by 5.2% in 2* for example. On the other hand, the mid- and up market segments post a drop in revenue per available room (respectively -0.8% and -2.9%). These categories, for which the average occupancy rate is around 65%, continue to suffer from a lack of international clientele.
On the top four chain hotel markets in Europe (which in all account for more than 75% of the supply of chains in Europe), France withdraws thanks to a 1.7% increase in RevPAR. Spain also posts activity that holds up well. Despite a non-negligible drop in occupancy rate (-2.1 points), the country closes the year 2002 in perfect stability with respect to 2001. On the other hand, the United Kingdom, which is more dependent on American clientele, sees its RevPAR drop by 1.9% with respect to 2001. As for Germany, the economic slump experienced by the country is largely responsible for the significant drop in the RevPAR (-5.3%). It may be observed that on the whole Southern Europe experienced fewer difficulties than the North. In 2002 the Mediterranean countries benefited from carryovers of clientele that limited the drop.
The top 10 European hotel groups finally resisted the slowdown of business with a room capacity that gains 3.7% and 22,588 rooms. This volume is equivalent to the growth posted by the French brand Accor, the indisputable leader of the European hotel industry with 1,965 hotels and 203,127 rooms (+13.2%). The Accor group's advance on these "challengers" increased significantly at the end of 2002. This development essentially took place in Germany, with the move of hotels of the German group Rema to the Mercure brand in April 2002 and the acquisition of around 30% interest in the capital of Dorint.
The three "followers" of the group Accor, Best Western, Six Continents and Louvre / Envergure show a slight drop in their supply (respectively -0.2%, -1.1% and -3.5%) but these drops do not challenge the ranking of the top 5 groups.
The 4.5% increase posted by Hilton International is not enough to make the British group gain a rung in the 2003 ranking. Next to these drops, it may be observed that the drop posted by Louvre / Envergure results from the strategy of brands in the group to rationalise brands. Concerning Six Continents, the group pursues the unrolling of Holiday Inn, of Express by Holiday Inn and of Crowne Plaza in Europe while the chain Posthouse (acquired in 2001 from the group Compass) has disappeared from the British territory.
Meanwhile, the American group Marriott, which made Europe one of its priorities for development, posts a strong increase as of January 1, 2003: +7.8% and 2,989 additional rooms. Another significant move is that of Choice whose supply grows to 1,843 rooms (+5.8%) and rises a rung in the ranking.
Finally, among the first 10 groups, the Spanish group NH posts a fairly significant drop (by more than 14%). In fact, in February 2002, NH sold the brand Golden Tulip - which it had acquired just a few months earlier - to the franchise's managing team. This drop in the Spanish operator's supply could nonetheless be compensated in part by one of the most spectacular operations of the year: the acquisition of the German brand Astron (one of the major operators on the domestic market) by NH.
Globally, the year 2002 will have been marked by a great deal of prudence in terms of development. The top 10 groups saw their supply progress by 17.6% at the end of 2001. The slump in the hotel business for some emblematic destinations (the capitals), the depression of the financial markets and the uncertain political perspectives are largely responsible for this. Even if the perspectives for 2003 are not precise because it is difficult to forecast the consequences of an intervention in Iraq, the performance of European hotels improved in the second semester. With the confirmation of this trend in the first semester 2003, the European hotel industry could show once again that it holds up better to international events than in the past.
The complete results of this study will be disclosed on March 6, 2003 at the Press Club de France, when MKG Consulting will present its outlook for the hotel sector in France and in Europe as it does every year.