In A Still Uncertain International Context, The Individual Business Customers Segment Boosts The Northern European Hotel Industry | MKG Reports
The year 2005 appears positive in the majority of the large European countries with performance indicators generally on the rise. However the context of the year 2005 was not always most favorable. The economic growth is moderate, the organization of elections in Germany could have generated the wait-and-see policy of the economic players, and London was struck by bombings.
The year 2005 appears positive in the majority of the large European countries with performance indicators generally on the rise. However the context of the year 2005 was not always most favorable. The economic growth is moderate, the organization of elections in Germany could have generated the wait-and-see policy of the economic players, and London was struck by bombings.
Preliminary data
Average room rates and RevPAR in euros (All taxes included)
However, the situation is improving and the low point of the last hotel cycle, in 2003, moves away. One notes, in particular, an increase in the volume of the individual business customers segment which has a strong positive impact on average prices and RevPAR (the Seminars clientele remains almost constant). It is thus initially the Northern European destinations, positioned on these market segments in direct catch with the economic activity, which post the best performances.
Another encouraging tendency which emerges from these last 12 months comes from the long haul customers, American and Japanese in particular, whose recovered vitality also supported the activity of European hotels.
Positives results for the United Kingdom in spite of the bombings
The year 2005 could have been much more difficult for the British hotel industry. First, the slowdown of the economic activity was strong, bringing back the country in the ranks of the European Union. Then, obviously, the London attacks were not without effect on the hotel industry.
The occupancy rates of the British capital posted particularly important declines after the month of July, (-9 points in August for example). However over the whole year, the RevPAR of the hotels in London know a positive evolution of 2,0%. In such circumstances, it is a very good result which demonstrates the dynamism of the destination. With occupancy rates that are always very high, although in decrease, the hotels in London did not give up to the panic and maintained the prices on a tendency directed towards a rise.
Birmingham or Manchester did not encounter the same difficulties linked to the bombings and post contrasting situations. In Manchester, the progression of the average rates, associated with very high occupancy levels, is revealing of a particularly « tense » hotel market where the RevPAR progression should reach around 6,0 % in 2005. On the other hand, Birmingham is characterized by a less flourishing situation. The occupancy rate stagnates on levels that are globally not has high and the average rates almost do no progress. The year 2005 should finish off with a stagnation of the revenue per built room. The supply capacity appears important with regards to a less energetic demand.
Very variable results in German cities
Germany will finish the year 2005 by recording a RevPAR growth of around 2% due to the increase of the occupancy levels. These are in fact expected to growth by 1,4 points in comparison to the previous year. However, the levels of occupancy of German hotels remain amongst the weakest in Europe, around 62,2%, in particular because of a strong growth of the recorded supply these last years. The filling up difficulties of these establishments explains the price stagnation.
Behind this general picture, one must note that the situations are very variable from one destination to another. As such, Düsseldorf did not benefit this year from the surplus of activity generated by its well-known shows, the K Messe and the Drupa and records a two digits RevPAR fallback. On the opposite, Koln or Hanover are amongst the most dynamic destinations due to the significant rebound of the occupancy rates.
The German hotel sector, which revealed in 2004 a strong capacity to benefit from the slightest event through an important increase of the average rates, will know a more favorable economic context, with the organization of the Football World Cup in June and July 2006, which should make it possible to consolidate the RevPAR growth.
The growth of supply explains the weak performances in Spain
In 2005, Spain is one of the only European countries to record a fallback of the revenue per available room. The occupancy rates and the average rates are negatively oriented. However, the year 2005 appears of much better results than 2004 during which RevPAR had shown a retreat of 7,3%.
The fallback of the performance indicators should be put on the account of a strong development of the supply, due to the extension of national networks and the implementation of international brands these last years. First, the newly opened units record, in the first months of their opening, occupancy levels that are generally weaker and thus have put in place aggressive rate policies in order to gain market shares. Then, after establishing themselves in the most advantageous locations, the networks are extending with openings in secondary destinations where performances are not as high. As such the overall average is pulled downwards. It is then the evolution of the geographical distribution of the hotel pool that explains the fallback of the indicators without it being necessary to consider a general decrease for all establishments. These phenomena greatly explain the negative orientation of the indicators in Spain whereas the evolutions at constant pool are positives for the main Spanish destinations.
The French hotel industry confirms its solidity
Preliminary data
Average room rates and RevPAR in euros (All taxes included)
In France, the recovery was initiated from the beginning of the year, but this growth then accelerated over the second semester. In particular, after two disappointing summer seasons in 2003 and 2004, 2005 confirmed a good season for the French Riviera in particular. Furthermore, November was excellent and recorded the largest monthly RevPAR increase in 5 years (+11,3%). In Paris, the hotel activity was boosted by the Batimat 2005, the international construction show. In spite of an alarmist international coverage of the events that took place in the French suburbs throughout November, the month of December is quite satisfactory. Even though we could have expected the worst for the « Paris » destination in this end of the year, the preliminary results for the month of December reveal very stable performance indicators with regards to the last year. In a context of an unfavorable economic situation (Bird Flue, rejection of the European Constitution in France, the failure of the candidature Paris at the OG, the riots in the suburbs), 2005 confirms once more the solidity of the French hotel industry whose RevPAR has only decreased once since 1997 (-2,4% in 2003).
In the hotel cycle, we observe in general a gap of about 2 years between the dynamic of the business segment and that of the leisure clientele. In fact, the improvements of the economic conditions generally do not have an immediate impact on the household consumption. The forecasts in this domain are even more cautious for the large European countries in 2006. The economists of course predict a GNP growth that is more sustained than that of 2005, but still pulled by the evolution of international demand.
The year that just started should confirm the improvement of hotel performances in Europe in spite of valuation risks of the Euro towards the Dollar, the rise of petrol prices or the uncertainty linked to the bird flue. The improvement, supported initially by the growth of the individual business customers segment, should accentuate in the coming months, as the economic revival consolidates the confidence of the households and reinforces the prospects on the Leisure segment.
Final results of the 2005 assessment of the hotel trade in France and Europe will be communicated during the Hotel Maker's Forum which will be held on Monday February 27th, 2006 at the Four Seasons George V hotel in Paris (see below link)
Since September 2004, the MKG Consulting database proposes a program that allows the daily monitoring of activity indicators for each hotel. This program counts 1 500 hotels and 125 000 rooms in France which makes it the most developed daily program in Europe.