German Hotel Performance - What's the score? | Deloitte Reports

The 18th FIFA World Cup tournament kicked off in Germany on 9 June. The month long feast of football has seen 32 nations from all corners of the world competing for sport's most prestigious prize. Twelve cities hosted matches across the country - with the final being played in Berlin on 9 July. Expectations across the German tourism industry were high leading up to the World Cup, the country expected to welcome 6m fans and hoteliers hoped to see €800m in revenue during the tournament.

Triple digit average room rate growth
On Friday 30 June host nation Germany met one of the favourites Argentina in the first quarter final match in Berlin. Over 70,000 fans packed the Olympiastadion to see Germany win 4-2 on penalties following a tense 1-1 draw after extra time.

On the night of the game, Berlin hoteliers saw revenue per available room (revPAR) increase by 144% driven by huge growth in average room rates these reached €199, more than double that achieved on the same day in 2005. In addition, average room rates increased by 77% the day before the game as fans, officials and the media arrived in the city.

Given the size of the event occupancies of 100% may have been expected. However occupancy only reached 72% on the night of the game and fell to 37% the following day. Given the building frenzy in Berlin, there are plenty of hotels for fans to choose from which would have diluted performance.

RevPAR leaps 227%
It was a similar story in Hamburg. On the same day, Italy played the Ukraine and enjoyed a comfortable 3-0 victory in front of 50,000 spectators. That night hoteliers in Hamburg saw average room rates up 142% to €195 on the same day in 2005 - boosting revPAR by 227%. In addition, the two nights prior to the match, hoteliers in Hamburg saw average room rates hit €139 and €170 respectively. Unlike Berlin, on the night of the match hoteliers in Hamburg were nearly full with 98% occupancy. However occupancy fell away quickly the night after the match to 53%.

The final score
Latest results from Daily HotelBenchmark(TM) show host cities have enjoyed significant improvements in revPAR on match days driven by average room rate growth. However occupancy growth has been limited.

The industry has put this down to the fact the FIFA, footballs governing body, block booked and subsequently returned over 1m hotel rooms, after being unable to sell them through World Cup Accommodation Service. In addition the World Cup is, naturally, not to everyone's taste and a number of tourists may have decided not to visit Germany during the tournament due to anticipated high prices.

The traditionally strong corporate and conference business has also seen a downturn this month. A number of conferences have been cancelled and business trips would have been postponed until after the competition. For cities such as Frankfurt and Berlin for which this corporate market is vital, so these occupancy levels may not come as much of a surprise.

At first glance it seems the World Cup has not brought the boom that German hoteliers had hoped for. It will be interesting to see how the entire tournament impacts hotel performance. A full analysis of the impact of the World Cup on German hotel performance will available in our fortnightly e-newsletter In The Know on 19 July 2006.