Modest recovery for Italian hoteliers in 2004 | Deloitte Reports
Despite a promising start in 2004 year-end results for the Italian hotel market showed only a marginal improvement. Hoteliers reported modest growth in revenue per available room (revPAR) of 1.5% to €95 compared to the prior year. Results from the Italian edition of the HotelBenchmark Survey by Deloitte show that although the hotel market performed better during the first half of 2004, the rate of growth could not be sustained throughout...
Despite a promising start in 2004 year-end results for the Italian hotel market showed only a marginal improvement. Hoteliers reported modest growth in revenue per available room (revPAR) of 1.5% to €95 compared to the prior year. Results from the Italian edition of the HotelBenchmark Survey by Deloitte show that although the hotel market performed better during the first half of 2004, the rate of growth could not be sustained throughout the rest of the year.
International tourist arrivals decline
Against the world-wide trend of record breaking visitor numbers, latest figures from the World Tourism Organisation (WTO) show that despite growth in the first half of the year, the number of international tourist arrivals to Italy fell by 6% year-to-October 2004.
Visitor numbers to Italy have not been helped by the strength of the euro which has increased competition between destinations generally across Europe. Non-euro destinations especially have become more attractive to visitors. Furthermore, the expansion of low-cost airlines into Eastern Europe has also made these destinations more accessible, especially for the price-conscious traveller. International tourist arrivals to Southern/Mediterranean Europe as a whole, showed more modest growth (3%) compared to countries in Central/Eastern and Northern Europe, which saw increases of 8% and 7% respectively in 2004.
Domestic demand under pressure
According to the Economist Intelligence Unit (EIU) Italy's Gross Domestic Product (GDP) grew by 1.2% in 2004. Whilst this is stronger than the last two years, this remains below the European Union average of 2%. Low consumer and business confidence have continued to put pressure on domestic demand for hotel accommodation. Italy saw the number of overnight stays from its domestic market fall by over 2% in 2004 compared to the prior year.
Occupancy drives revPAR growth
Overall Italian hoteliers saw occupancy levels climb to 62% in 2004, up marginally from 60% in 2003. However, average room rates fell by half a percentage point to €154. Despite this slight decline, Italy's average room rate still remains some €52 higher than the European average.
While Italy as a whole has seen some growth in revPAR during 2004, the performance of its key cities has been quite varied. The graph below shows that whilst Florence, Rome and Turin reported revPAR improvements; Bologna, Milan and Venice have all seen declines compared to the prior year.
The majority of these cities saw average room rates decline in 2004. Only Milan and Turin managed to increase average room rates however, both reported small declines in occupancy. Following the trend set in the first half of 2004, Venice continued to struggle during the second half of the year. Whilst the city reported the largest decline in revPAR of all Italian markets tracked by the survey, it still has the highest revPAR of any market in the country. At €155, Venice's revPAR is some €60 higher than the average for Italy last year.
Hotel performance of key Italian cities - 2004 vs. 2003
Marginal improvement expected to continue Over the coming years it is expected that Italian hotels will continue to see only marginal improvements in performance. The EIU expect Italy's GDP to increase by 1.2% during 2005 and 1.5% in 2006, remaining below the European Union average of 2%. In addition international tourist arrivals to the country are forecast to increase by only 1% per annum between 2005 and 2009.
Italy has increasingly found itself competing for visitors with new emerging destinations in Central and Eastern Europe. What impact this will have on the long-term performance remains to be seen. However Italy's lack of investment in tourism in relation to other European countries remains a concern. Currently the country invests €24.4m each year in its tourism industry, this is less than Spain (€102.6m), France (€73.6m) and the UK (€35.5m). Needless to say in an increasingly competitive market, this is likely to hamper the country's attempts to increase its visitor numbers. Nonetheless, for the time being at least, Italy continues to remain one of the top tourism destinations in the world.
The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,500 hotels and 1.2 million rooms every month. Monthly surveys are produced on the following areas:
- Four regional rate and occupancy surveys covering Asia-Pacific, Europe, Central & South America and the Middle East & Africa.
- Eleven country/sub region rate and occupancy surveys for Australia, Benelux, China, Germany, Italy, New Zealand, Nordic Countries, Qatar, Southern Africa, Spain and UK.
- Two city rate and occupancy surveys for London and Paris.
- Monthly profitability surveys on Germany and London.
- On an annual basis we produce profitability surveys tracking performance across all regions of the world.
For further information on the Italian edition of the HotelBenchmark Survey please contact Konstanze Auernheimer on +44 (0) 207 007 0928.