Final Results 2003 - Chain Hotels In Europe: Within A Very Difficult Context, A Drop In Activity In 2003 That Met Expectations - MKG Reports

• The 2003 MKG Consulting forecasts predicted a drop in RevPAR between -2% and -4%: the year closed with a fall of 3.5%.
• The budget categories once again come out ahead of the pack
• Austria strongly up, the United Kingdom and France resisted better than the other European countries.

For 20 years now, MKG Consulting has presented the exclusive official statistics of hotel chains. Data concerning activity for 2003 in France and Europe will be supplemented by a more detailed analysis during the 2004 edition of the Hotel Makers' Forum, on March 8th, 2004 at the Press Club de France - Sofitel Champs Elysées. Information and subscription at: .

After drops of 2.6% in 2001 and 1.1% in 2002, RevPAR (revenue per available room) posted a 3.5% drop in 2003. Compared to last year, however, the trend is down and the demand is slowing: the occupancy rate lost 1.7 points at the end of 2002; it lost 1.2 points at the end of 2003. Midmarket and upmarket categories have in this way almost managed to curb the fall in activity with a drop of 0.5 points in occupancy in 3* and 1.2 points in 4*. The budget categories have seen more pronounced drops, though their occupancy remains high (more than 70% for the 0/1*, more than 68% for the 2*). For its part, the average daily rates in all categories combined, after being perfectly stable in 2001 and 2002 in particular, was downward-oriented in 2003 and posted a drop of 1.7%. The 3* and 4* hotels in particular, have continued to open less profitable distribution channels (internet), have increased promotions, and have sometimes oriented their business mix towards "Groups" which impacted the average daily rates by 1.9% in 3* and 3% in 4*. To the contrary, the budget categories have continued raising rates: the average daily rate notably rose by more than 5% in 0/1*.

With a rise in RevPAR by 7.4%, Austria turned out to be an "island of prosperity" in the European hotel landscape in 2003. The occupancy rates (+2.1 points) and the average daily rates (4.1%) are rather clearly oriented upwards.

More globally, the countries that perform the best in 2003 are those that are the farthest along in their hotel cycle: France posted a drop in RevPAR of 2.4% and the United Kingdom finished the year with a 2.3% drop. These two countries have notably resisted better than the Netherlands (-12%), Belgium (-4.4%), Spain (-4.2%), and Italy (-3.2%). France and the United Kingdom are the two European countries with the most developed chain hotel industry. Moreover, these two countries have a high supply of budget hotels, which permitted to better absorb the shocks of the year 2003.

One also notices, that concerning France, it is the only country along with Austria that succeeded in maintaining average daily rates globally oriented upwards. In France, the drops in the average daily rates have not reached the budget categories and the average daily rates rose by 1.6% globally. The United Kingdom, to the contrary, saw a 1.6% drop in the average daily rates, though this decrease seems to have permitted a drop in occupancy only limited to 0.5 points. We also note that the United Kingdom recorded the highest occupancy rates among the other countries: over 72% on average.

Among the other notable events of the year, we notice the negative trend in Germany is now in the process of getting handled. After having recorded a drop of 5.2% at the end of 2002, the RevPAR lost 3.1% by the end pf 2003. Despite a supply that has been rising considerably in recent years, increasing the competition as much, the occupancy rate was steady at the end of the year (+0.4 points).

A good month of December (+2.4% in RevPAR) at the European level and favourable forecasts from financial analyses institutes in terms of GDP growth are encouraging for 2004. It is at any rate unlikely that 2004 will be marked by as many catastrophes as 2003 (war in Iraq, devaluation of the dollar, SARS crisis).

Nevertheless, several uncertainties remain: the international geopolitical situation is far from being stabilised, the drop in the dollar is expected to continue (up until 2005 some analysts predict), the bird flu crisis is worrisome and travellers are still holding back with regards to long-haul trips.

The recovery will certainly take place shortly at each country's particular pace. MKG Consulting nevertheless anticipates, at the European level, a delicate or nearly balanced first semester and an acceleration in the recovery beginning in the second semester.

Methodology - The MKG Consulting European Database includes a sample of 6,000 corporate operated chain hotels representing 600,000 rooms in Europe. The data, gathered monthly from each hotel, is redressed by categorical breakdown of the supply of corporate operated chains and by the weight of each country in the European Union. MKG consulting has the largest hotel database in the world outside the USA, with the best representation of all the hotel segments.