RevPAR down 19.2% but the worst should be over for European hoteliers

Bucharest, Romania – November 18, 2009 – A report produced quarterly by Deloitte, the business advisory firm, has found that year-to-September hotel performance fell across Europe. Revenue per available room (revPAR) performance in European hotels was down 19.2% to 58 Euro. This decline was driven by a 12.3% drop in average room rates to 108 Euro, while occupancy levels fell to 61.6%.

• London boasts the highest occupancy
• Glasgow and Edinburgh were the only two cities in Europe to show positive occupancy growth
• In the euro zone, Spain was hit the hardest, due to a fall in the number of tourists from its major source markets
• Eastern European countries such as Romania, the Czech Republic, Slovakia, Russia, Estonia, Lithuania and Latvia were hit the hardest, each reporting revPAR declines in excess of 20% in local currency.

Commenting, Alex Kyriakidis, Global Managing Partner of Tourism Hospitality & Leisure at Deloitte, said: “The past year has been one of turbulence for European hoteliers as the economic crisis has taken its toll. Soaring unemployment, the outbreak of the H1N1 influenza virus and the strength of the Euro against many world currencies has seriously impacted hotel performance in Europe. As many consumers chose the “staycation” over travelling abroad, and businesses tightened their purse strings on corporate travel - hotels, airlines and tour operators all saw a fall in performance and sales this year. Every city across the region reported declines in revPAR year-to-September, some hit more severely than others.”

In the euro zone, hoteliers saw revPAR fall 16.8% as the strength of the Euro against Sterling deterred travellers to the traditional hotspots of Spain, France and Italy. However, countries outside the euro zone did not come out unscathed, with revPAR dipping in excess of 20%, as average room rates drove the decline.

Spain 

Of Europe’s top three holiday destinations, Spain was hit the hardest, due to a fall in the number of tourists from its major source markets, the UK, Germany and France. Britons in particular shunned the country as Sterling weakened against the Euro. Spain has also met intensified competition from countries further east including Turkey, Tunisia, Egypt and Morocco. Spain’s two key cities, Barcelona and Madrid reported revPAR declines of 22.5% and 30.5% respectively. The main driver of decline in Barcelona was a 15.7% fall in average room rates to 113 Euro. Occupancy also fell 8.1% to 64.4%. A wave of new hotel openings in the city this year may also hinder hoteliers going forward as they struggle out of the recession.

Germany 

Despite Germany being one of the first countries to exit the recession along with France in the summer, tourism has struggled with hoteliers feeling the brunt. A slowdown in trade fair business, stagnating leisure demand and an increase in hotel supply in a number of cities, led to variations in results across the country. Dusseldorf saw the largest fall in revPAR, down 33.3%, while Hamburg, Berlin, Frankfurt and Cologne reported less severe declines. Germany’s national airline, Lufthansa, recently announced a 7.4% reduction in its number of weekly flights during the winter months due to weaker demand, particularly on its intra-European routes. However, as the economy in Germany continues to improve during the final months of 2009 and 2010, business and leisure demand should gradually pick up.

United Kingdom 

The UK was at the heart of the financial crisis in 2008 and unlike some of its European counterparts, is still in recession. The economic crisis has had a huge impact in the UK. As unemployment reached its highest levels in 13 years in the summer, coupled with the strength of the Euro against the UK pound, many cash strapped Brits chose to holiday at home. However, despite the “staycation” effect, hotels in the UK have been on a downward spiral for most of the year. Although hoteliers in London saw revPAR fall 7.6% year-to-September, they still boast the highest occupancy, in Europe at 79.8%. Scottish hoteliers also have something to celebrate, as Glasgow and Edinburgh were the only two cities in Europe to show positive occupancy growth for the period. Edinburgh posted the second highest occupancy in Europe at 76.8%, just behind London but ahead of Paris.

Czech Republic 

In the non-euro zone, Prague reported some of the greatest revPAR falls year-to-September, plummeting 26.4% to 1161 CZK (Czech Koruna). The Czech Republic capital has seen a number of new openings during 2009, totalling more than 900 rooms. This, combined with a fall in the number of tourist arrivals has impacted hotel performance. However, as the recession subsides and some of Prague’s key source markets such as Germany recover, the city’s hotels should start to show signs of recuperation.

Russia 

Moscow’s growth decade also came to an abrupt halt this year when the economic downturn and decline in business demand drove occupancy down to 57.8%. Approximately 60 US Dollars was knocked off average room rates, resulting in a 30.5% decline in revPAR – the weakest performing city outside the euro zone. Like Prague, Moscow has seen a wave of new openings this year and according to Lodging Econometrics is one of the top five cities in Europe in terms of new hotel projects on the horizon, with eight new projects, equating to over 2,000 rooms to open next year.

Looking ahead, Marvin Rust, Hospitality Managing Partner at Deloitte, said: “We are already seeing signs of economic recovery across Europe. Consumer confidence has started to improve as well as a number of countries including Germany, France, Greece and Portugal closing the door on the recession. It will be an uphill struggle for some months to come before hoteliers start to post positive results once more, however it looks like the worst may be over and the New Year should see a reversal of part of the revPAR declines seen in 2009.”

Hotel performance of selected European markets year-to-September 2009

Source: STR Global

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