Bucharest, November 18 – New room supply flooding Bucharest during a year affected by the financial crisis has led to a 14.2% drop in hotel occupancy to 61.2%, the Romanian capital thus experiencing the second largest occupancy decline in Europe after Reykjavik (-24,9%), according to the “Hospitality Vision” Deloitte study covering the year-to-September performance. Bucharest has suffered significantly from limited supply over the past few years, while demand on the hotel market kept rising. New supply came in 2008 with the opening of Ramada Plaza, Radisson SAS and the RIN Grand Hotel extension.

“Bucharest is mostly a destination for business travel and this is more than evident from the latest Deloitte study. Since the business environment is currently reducing costs, including the travel ones, occupancy rates and hotel revenues are both affected,” explains George Mucibabici, Deloitte Romania Chairman.

According to the study, average room rate in Bucharest is 120 Euro, while revenues per room (revPAR) – 73 Euro. Over the analyzed period, this index has dropped 8.2%. “In this market environment, industry perspectives – as the ones for the economy overall – are uncertain,” Mucibabici continued. “The long-term challenge, both for local authorities and hotel and touristic operators, will be to transform the capital into a cultural and leisure destination for foreign and Romanian tourists”.

Actually, the financial crisis could be an opportunity for the hotel industry in emergent markets, according to Alex Kyriakidis, Global Managing Partner of Tourism, Hospitality & Leisure Deloitte.

“Hotel investment activity is down to approximately 5 billion Euro in Europe from around 21 billion Euro last year. However, developers who can raise cash are moving quickly into emerging markets, such as Turkey, Russia and the Commonwealth of Independent States. Sovereign wealth funds and budget brands are also still making acquisitions. The current financial turmoil could present opportunities to cash-rich companies looking to invest in distressed hotels assets or companies.”

A report produced quarterly by Deloitte, the business advisory firm, has found that year-to-September hotel performance fell slightly across Europe. Revenue per available room (revPAR) was down 1.5% to 76 Euro driven by a 1.9% drop in occupancy while average room rates decreased marginally to 112 Euro. However, when looking at September figures alone, revPAR across Europe dipped 6.7%.

“The world is now dealing with one of the most significant economic slowdowns in modern times and some European countries are being affected more than others,” Alex Kyriakidis continued. “It’s clear that occupancy is dropping in most cities and from past experience, average room rates generally follow. There is no end in sight of this global recession. The hotel operators will be focusing on value for money more than ever before. There will be cannibalization across the segments as consumers become much more budget conscious.”

Cities across the Euro zone have seen variations in revPAR performance. On average, occupancy has dipped into negative territory, while average room rates have risen slightly.

Brussels bucked the trend. Occupancy increased 3.3% and average room rates 6.3%, resulting in a 9.8% jump in revPAR to 82 Euro. Hotels in Brussels are considered less expensive compared to other capital cities in Europe and with limited new supply combined with stable corporate demand from European Commission conferences, hotel performance was strong.

Cyprus was another star performer, with the best revPAR growth in the Euro zone - up 11.8% to 88 Euro so far this year. Hoteliers here can also boast that, despite the tightening of belts elsewhere, they managed to push up average room rates quicker than any other place in the Euro zone – up 14.4% to 142 Euro.

On the flip side, hotel performance did not fare so well in Dublin. Occupancy fell 5.7% while average room rates decreased slightly resulting in a 6.2% revPAR decline. During the past ten years, a strong economy and lucrative tax breaks have encouraged hoteliers to double the number of hotel rooms in Ireland. The combination of so many extra rooms and economic decline in both Ireland and its major source markets – the UK and the US - means that domestic and international tourism is suffering.

Fluctuations in hotel businesses across cities in the non-Euro zone were more extreme.

Political stability in Israel and a growing interest in both religious travel and trips to the Dead Sea are boosting hotel business in this country. RevPAR in Tel Aviv increased 18.1% to 118 Euro during the first nine months of 2008 and the upward trend should continue into 2009 when the city celebrates its centenary. Tel Aviv has also achieved the second highest occupancy in Europe; at 80.9% the city is only half a percentage point behind London. Jerusalem and Eilat also did well, with revPAR up 16.3% and 10.8% respectively.

Looking ahead, Marvin Rust, Hospitality Managing Partner at Deloitte, said: “So far this year, hotels are proving they can cope with the economic downturn but the most dramatic events in the current financial crisis did not develop until after August and hotel performance is now suffering to a greater degree as belts tighten. RevPAR in Europe has dropped for four consecutive months and will remain in negative territory through the last quarter of this year.

The recent downward trend in Euro zone business sentiment shows no sign of easing and it is not surprising that city breaks once considered affordable treats are now seen as a luxury. Hoteliers now face a difficult combination of disappearing consumer confidence, a squeeze on credit and a tightening of business spending, which is going to impact hotel performance to a greater degree into 2009.

Hotel performance of selected markets in Europe year-to-September 2008:

Source: STR Global 

All analysis can be found in Deloitte’s quarterly report, ‘Hospitality Vision’, accessible at the following link: www.deloitte.com/ro/hospitality-vision-survey

All figures quoted are in Euros.

                                                                                                                       ###

About Deloitte
“Deloitte” is the brand under which tens of thousands of dedicated professionals in independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management, and tax services to selected clients. These firms are members of Deloitte Touche Tohmatsu, a Swiss Verein (“DTT”). Each member firm provides services in a particular geographic area and is subject to the laws and professional regulations of the particular country or countries in which it operates. DTT helps coordinate the activities of the member firms but does not itself provide services to clients. DTT and the member firms are separate and distinct legal entities, which cannot obligate the other entities. DTT and each DTT member firm are only liable for their own acts or omissions, and not those of each other. Each DTT member firm is structured differently in accordance with national laws, regulations, customary practice, and other factors, and may secure the provision of professional services in their territories through subsidiaries, affiliates, and/or other entities.

About Deloitte Central Europe 
Deloitte Central Europe is a regional organization of entities organized under the umbrella of Deloitte Central Europe Holdings Limited, the member firm in Central Europe of Deloitte Touche Tohmatsu. Services are provided by the subsidiaries and affiliates of Deloitte Central Europe Holdings Limited, which are separate and independent legal entities. The subsidiaries and affiliates of Deloitte Central Europe Holdings Limited are among the region’s leading professional services firms, providing services through more than 4,000 people in more than 30 offices in 17 countries.

About Deloitte in Romania 
In Romania, the services are provided by Deloitte Audit S.R.L., Deloitte Tax S.R.L., Deloitte Consultanta S.R.L. and Reff & Associates SCA (jointly referred to as "Deloitte Romania") which are affiliates of Deloitte Central Europe Holdings Limited. Deloitte Romania is one of the leading professional services organizations in the country providing services in five professional areas-audit, tax, consulting, financial advisory and risk services through almost 500 national and specialized expatriate professionals.