Dutch hotel market suffering under crisis | Horwath HTL Reports
The Dutch hotel market has been hit hard by the economic crisis. The HOSTA 2009 report by consulting firm Horwath HTL shows that both occupancies and average room rates of the hotels have decreased. It is expected that the results for 2009 will be even lower than in 2008.
The research was carried out by Horwath HTL among 288 three, four and five star hotels in The Netherlands. The research shows that the average occupancy has dropped from 72.5% in 2007 to 68.1% in 2008, a decline by 4.4 percentage points. This strong decrease marks the end of a recovery period for the Dutch hotel market. It is the strongest drop since 2003, bringing hotel occupancies below the level of 2005.
The average room rate dropped by 4.5%, from € 110 to € 105. This is the first time since 2004 that the average room rates have declined.
Because of the decrease in both occupancies as average room rates, the RevPAR or Revenue Per Available Room also declined. The RevPAR decreased from € 80 to € 72, a decrease by 10% and the strongest decrease since 2003.
Five star hotels hit the hardest
The cause for the strong decline in the five star market can be found in the economic crisis. Since the start of the credit crunch and the government bail-outs that were given to businesses such as banks in both the US and The Netherlands, company spending is watched closely. The news items on festive retreats organised by companies such as Fortis and AIG have contributed to this. Luxury hotels now have an image problem. Many companies will no longer allow their employees to stay in five star hotels. As a result, Sheraton Amsterdam Airport and NH Amsterdam Centre have already decided to drop their fifth star and to continue as four star hotels.
Average room rates in Amsterdam in strong decline
Outside the Amsterdam region the occupancy decreased as well, from 67.3% to 64.0%. The average room rates here did increase slightly, from € 90 to € 91. The RevPAR decreased by only 3.3%, from € 60 to € 58.
Profits also decreased
Hotels have indicated that strong measures are taken to diminish the effect of the economic crisis. There is more focus on sales and marketing, and many hotels have lowered their rates. Budgets have also become stricter, including personnel costs. Vacant positions are no longer filled, and many annual contracts are ended.
Forecast
Experience has taught that the decline of the hotel market is quicker than the following recovery. Especially a decrease in average room rate, due to price dumping, can take years to recover from. Therefore, only 10% of hotel managers expects that the hotel market will be fully recovered in 2010. Approximately 45% expects full recovery to be achieved in 2011, and 33% in 2012. Some 12% of hotel managers expects full recovery will not be achieved before 2013 or 2014.
For 2009, the expectation is that the average occupancy will continue to decrease, from 68.1% to 62.2%. The average room rates will decrease by 3.8% in 2009, to € 101. As a result, the RevPAR will decrease by 12.5% to € 63. For 2010, hopes are for a partial recovery of the occupancy to 65.7%, but a further decrease in average room rates to € 99 is expected. The RevPAR could then increase to € 65.
HOSTA 2009
Marco van Bruggen
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Horwath HTL (Netherlands)