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Global Hoteliers feel the heat

Hoteliers around the world report decline in revenue as global economy impacts travel and tourism
UK, August 18, 2009 — Global hoteliers reported double-digit revenue per available room (revPAR) declines year-to-June 2009, according to latest analysis by Deloitte Touche Tohmatsu (DTT). All regions saw revPAR fall in excess of 15%. The Middle East was the least affected region, while Europe was the most affected.

Alex Kyriakidis, DTT Global Tourism, Hospitality and Leisure leader, said: “At the half-year stage, it is no surprising that hoteliers around the world are feeling the heat. This time last year, we could not have predicted that hotel performance would have been as severely affected as it has been. The global economic crisis has hit businesses and consumers hard in all corners of the globe and, as they tighten their travel budgets, the travel and tourism industry, in turn, has suffered. This has resulted in suppressed demand and more vacant hotel rooms around the world.”

Middle East
The Middle East has been the least affected region year-to-June 2009, according to results from STR Global, the leader of global hotel benchmarking. Although the Middle East posted a 17.5% decline in revPAR to US$132, driven by drops in both occupancy and average room rates, which are still the highest in the world at 63.2% and US$208 respectively. Beirut achieved the strongest revPAR growth, not only in the Middle East, but also worldwide, up a staggering 124.4% to US$117. Increased political stability helped the city’s hoteliers increase occupancy 72.1% to 66.9%, while average room rates grew 30.3% to US$175. Other cities in the region posting revPAR growth year-to-June included Abu Dhabi (6.9%), Amman (3.2%) and Jeddah (20.4%).

On the flip side, Riyadh, Muscat, Cairo and Dubai all reported declines in revPAR year-to-June, with Dubai posting the greatest fall, down 35.9% to US$177. Despite this year’s drop, Dubai has reported five years of double-digit revPAR growth up until this year and has managed to grow its average room rates year-on-year despite the huge influx of supply entering the market every year. The emirate demands the second highest revPAR in the region after Abu Dhabi, and the fourth highest revPAR in the world. Year-to-June 2009 results from Dubai International Airport reported a 5% increase in passengers to 19,453,775 over the same period in 2008. The strength and attractiveness of Dubai as a hub between the East and West continues, and recent marketing initiatives by the industry in partnership with major airlines, is maintaining revPAR performance at the upper quartile globally.

North America
Hotels in North America followed closely behind the Middle East year-to-June 2009, with revPAR falling 19.3%. The region achieved the lowest revPAR in the world at US$54, driven almost equally by declines in occupancy and average room rates. RevPAR in Mexico City reported the strongest declines year-to-June, falling 37.8% to US$51. As well as the depressed demand due to the economic downturn and negative publicity from gang-related violence, the outbreak of swine flu that hit the headlines in April this year has had a negative impact on hotel demand in the city. In the US, New York City saw the highest fall in revPAR year-to-June, falling more than 30% to US$144. However, despite this, the city still achieves the highest average room rates and revPAR in the US.

Central and South America
In Central and South America, revPAR fell 21.3% year-to-June 2009 placing the region in third position. Occupancy fell 12.1% to 57.9%, while average room rates dropped US$13 to US$110. The least affected cities were Santiago and San Juan, with revPAR drops of 22.2% and 18.2% respectively. Sao Paulo reported its revPAR declined 26.5% to US$47, mainly as a result of average room rates declining 17.1% to US$82.

Asia Pacific
The second most affected region year-to-June 2009 was Asia Pacific with revPAR tumbling 29.7% to US$67. Average room rates drove much of the decline, down 17.8% to US$117; however occupancy fell as well, down 14.4% to 57.3%. In India, the terrorist attacks in Mumbai at the end of 2008 negatively impacted performance, and revPAR in the city fell almost 50% to US$109. Hoteliers slashed average room rates by more than US$120 to make up for the 17.6% decline in occupancy. Elsewhere in India, revPAR in New Delhi is suffering to a greater degree – down 52.8%. Beijing’s revPAR is down 44.2% to US$43. The best performing cities in the region were those which were able to grow average room rates, resulting in revPAR declines of less than 10%, including Bali, Osaka and Tokyo.

Europe
When measured in US dollars, the worst-affected region has been Europe, with revPAR falling 31.3% to US$75. However, in Euros negative growth was less severe, falling 20.8% to €55 year-to-June 2009. The strength of the Euro continues to keep tourists away as the region becomes much more expensive than in the past few years (especially for visitors from the UK and US). The worst affected cities in Europe (when analysed in local currency) include Dusseldorf (-41.1%), Madrid (-32.0%) and Moscow (-30.9%). The strongest occupancy in Europe was in London, at 77.1%.

Commenting on the results, Alex Kyriakidis said: “Around the globe, a lull in consumer and business confidence as a result of the economic downturn has hit travel demand, and hoteliers are feeling the pinch. As unemployment figures continue to rise throughout the world, people will inevitably make cut backs on summer vacations this year. Also, the swine flu pandemic has impacted travel in affected areas. However, the strength of some currencies, such as the Euro and US dollar against the pound, provides a good opportunity for people to take advantage and travel to new destinations. All in all, at a time when consumers and businesses are already cutting back on travel, the remainder of 2009 will be a challenging time for hoteliers.”

Ends

Notes to editor
All analysis in US$.

All data in the release is sourced from STR Global, with the exception of North America, this data is from Smith Travel Research Inc.

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