HotStats European Chain Hotels Market Review – August 2010
Brussels bets on buoyant September as hotels suffer a loss during MEP’s summer break
Profitability levels in Brussels dropped to -€6.62 per available room during August whilst European Parliament was in recess, according to the latest HotStats survey from TRI Hospitality Consulting.
Whilst the market mix in Brussels is dominated by corporate and conference demand during the majority of the year, accounting for approximately 60% of total demand, this month the level of demand attributed to the commercial sector declined to 43.5% of total demand.
Moreover, annual Total Revenue per Available Room (TrevPAR) in the city is typically strong due to a high ancillary spend derived from meetings and conferences, which are captured from the high concentration of corporate headquarters, government institutions and NGOs. However, due to the absence of this demand during August, at €67.19, the recorded TrevPAR at hotels in Brussels was more than 70% below the year-to-date average for the city at €114.81.
“Unlike other cities in Europe which are able to minimise losses during the summer months by filling gaps left by corporate demand with leisure visitors, Brussels’ profile as a tourism destination and appeal to the leisure market is relatively low. The loss of high-yielding commercial-related demand during this period will understandably impact greatly on the profitability of hotels in the city” said Jonathan Langston, managing director of TRI Hospitality Consulting.
Further adding to the gloomy performance figures, short-term trough periods such as this will often cause a hotelier’s cost margins to rocket as they are not supported by adequate levels of achieved revenue. This is exemplified by payroll levels in Brussels this month, which at 55.3% of total revenue, were more than 15 percentage points above the year-to-date average of 39.1%.
Major European markets lament the loss of commercial demand
Although it will undoubtedly return in September, the drop in corporate and conference demand during the summer season has caused huge declines in profitability in a number of markets throughout Europe, according to the latest HotStats survey.
As well as impacting the level of demand, illustrated by hotels in Paris, which at a room occupancy of 66.8% in August were almost ten percentage points below the rolling 12 month average, hotels are forced to accommodate a much higher proportion of lower-yielding leisure demand, impacting the achieved room rate.
In Rome, the achieved rate in the corporate sector, at €173.45 in the 12 months to August 2010, is almost 50% higher than the value of leisure demand, at €116.87, as hoteliers slash prices in order to drive volume. And whilst corporate demand accounted for only 13.3% of total demand in August, the lower-yielding leisure and group sectors accounted for approximately 65% of total demand. As a result, the achieved room rate in Rome during August was more than €30 behind the year-to-date average for the Italian capital.
In contrast to the declines across much of Europe, thanks to major events such as the Grachtenfestival (45,000 visitors), Uitmarkt (500,000 people) and Gay Pride (a further 500,000 visitors), hotels in Amsterdam achieved the highest TrevPAR across all the markets polled at €175.46, fuelled by a growth of 23.8%.
In addition to the growth in headline performance levels in Amsterdam being helped by a 7.5 percentage point increase in room occupancy, Revenue per Available Room (RevPAR) levels in the city were boosted by a 19.1% increase in average room rate. This was primarily as a result of a four-fold increase in the achieved rate in the non-discounted rack rate sector. Increases were also achieved in the leisure (10.2%) and group sectors (24.6%).
“Thanks to a strong calendar of events, Amsterdam avoided the pain felt by many of the cities across Europe during a best-forgotten August. Heading into a characteristically busy period of commercial activity in September, it is essential that hoteliers in these markets regain focus in order to get back on track with the recovery,” said Langston.
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