Year-to-April results from the STR Global HotelBenchmark™ Survey show that European hotels got off to a slow start in 2008, with revenue per available room (revPAR) up only 1.1% to €68. Analysis by Deloitte, the business advisory firm, shows that even though hotel performance in general is static there are still several success stories across the continent.

Hotels in Russia continue to perform well, with Moscow achieving some of the highest revPAR results in Europe at US$255, despite limited occupancy growth. In US currency this amounted to revPAR growth of 28.1%.

Natalia Alekhina, Manager, Deloitte, CIS commented: “The Russian hospitality market is continuing to perform exceptionally well and deliver excellent results. Moscow ranks among the top markets in Europe with RevPAR reaching USD 225, growing by 28.1 percent in USD over the reviewed period. At the beginning of 2008, demand for hotel accommodation in Moscow remained high. However, hotel occupancy has changed little since then as it has virtually reached its peak under the existing demand structure, which is primarily generated by business travelers. At the same time, ARR, and consequently RevPAR, continued to grow, which is indicative of a persistent shortage of quality hotel space. The strength of the current market conditions allows hotels to minimize the corporate discounts they offer, knowing that rooms can be sold at higher rates. This greatly affects Moscow’s ARR, surpassing that of most European cities.”

St. Petersburg saw strong growth during the first four months of 2008, revPAR increased by 35.9% in US currency, driven by increases in average room rates. This impressive hotel performance, alongside an attractive tax structure and strong economic performance due to high oil prices, are all setting the stage for an increasing amount of foreign direct investment into Russia. Park Plaza Hotels & Resorts, Rezidor Hotel Group and InterContinental Hotels Group are amongst the companies expanding in the country. According to Lodging Econometrics, Moscow and St. Petersburg currently have 6,184 and 2,711 new rooms in their development pipelines respectively.

Paris saw impressive revPAR growth during the first four months of the year, up 16.6% to €173. The city hosted a number of sporting events so far this year, including the RBS 6 Nations Rugby Championships and a friendly football match between England and France during March, which no doubt attracted sports fanatics to the French capital. Occupancy pushed past the 75% mark, while average room rates were up 10.6% to €229.

In Israel, hoteliers in Jerusalem and Tel Aviv continued to build on the 2007 performance, with both cities reporting double-digit revPAR growth, up 20.7% and 15.0% respectively in local currency terms. For the first quarter of 2008, the Israel Ministry of Tourism saw a growth of 44% to 648,000 tourists compared to the first quarter the prior year, in turn impacting hotel performance in the country. Clearly, not all visitors require hotel accommodation!

In Turkey, Ankara and Istanbul also performed well, reporting double-digit increases in revPAR. RevPAR in Ankara increased 35.4% to US$79 while Istanbul was up 35.3% and achieved a much stronger absolute revPAR at US$151. Turkey’s Ministry of Culture and Tourism is encouraging development in the industry and recently set a long-term tourism strategy with the ultimate goal of becoming one of the top five destinations in the world to receive the highest number of tourists and tourist receipts by 2023. 

Among the cities pulling down European hotel performance were Tallinn, Baku, Dublin, Rome and Reykjavik. Tallinn saw the largest decline in revPAR, down 16.2% due to a 15.6% drop in hotel occupancy. Dublin also experienced a decline in revPAR, down 5.6% as average room rates saw marginal increases and occupancy dipped 6.3%. Rome and Reykjavik also saw revPAR decrease by 5.2% and 3.4% respectively.

Commenting, Alex Kyriakidis, Global Managing Partner of Tourism, Hospitality & Leisure at Deloitte said: “The UK and USA are strong source markets for Europe. With the current economic slow down and the strength of the Euro against Pounds Sterling and the US dollar, it is likely European hoteliers will see a downturn in visitor numbers from these countries.

However, world tourism levels are due to increase, driven by emerging economies and the successful targeting of non-traditional source markets.”

Looking ahead, Marvin Rust, Managing Partner for Hospitality in Deloitte UK said: “We are observing marginal decreases in occupancy across Europe suggesting there is less business to go around. However, it is promising to see that for most European cities average room rates have seen good growth. The cities where the economy is weaker, such as Dublin, and Rome have seen the lowest increases in rates. Watch out for cities in Switzerland and Austria which will see rapid improvements in hotel performance during June when they host the UEFA Euro 2008 ™ football tournament.”

Hotel performance of selected markets in Europe year-to-April 2008

Source: STR Global HotelBenchmark™ Survey   
* - US dollars

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