Hotel performances across Europe stabilised
Stabilisation in economic conditions throughout most European countries impacted hotel performances, slowing down the rate of RevPAR growth and the generally good momentum that was enjoyed prior. Results have however regained some normality, reaching pre-crisis levels.
Throughout the 27 countries in the European Union, hotel occupancy rate (OR) levels for the month of September have revived, reaching or bettering the same month last year. Overall, OR hovers around 75%, and in some markets pushing 80% and above. In London, Venice, Amsterdam, Paris, Ghent, Zurich, Munich, San Sebastian or Berlin, OR reach even more than 85%. Meanwhile, budget and economy segments perform best, leaping 5 percentage points. As expected, occupancy growth in the other categories is more modest, although remain positive.
This overall good level of demand allows hoteliers to sustain good average daily rates (ADR) progress. Higher categories in the hotel spectrum manage to achieve better ADR growth, having greater price elasticity and margin to manoeuvre. They also target higher paying (more profitable) clientele segments, such as in international leisure individuals and meetings industry. Indeed, fine tuning yield management and selected distribution channels become sophisticated instruments for improving revenue without shifting rack rates significantly. In addition, the newly regained rates are a solid basis not only to retain but to improve the high quality and performance of the European hotel offer. Due to the importance of upper upscale and luxury hotels in their lodging supply Geneva, Cannes and Venice show the higher ADR levels.
Steering Revenue management and distribution channels becomes a sophisticated instrument that makes it possible to exploit the slightest opportunity for improving revenues without varying the rack rates, an act that is not well accepted during an economic crisis. In turn, RevPAR grows by 5%, driven by a few European growth engines such as the Netherlands.
As usual the 27 countries in the Union are divided into three categories: those that experienced a brief moment of economic weakness, such as Germany and Sweden; those positioned in the good average, revealing the phenomenon of stabilisation after strong growth recorded during periods of crisis – the vast majority of countries – and the few countries that stand-out for their very strong growth, including Portugal, the Netherlands, Poland and to a lesser extent Austria.
The improvement experienced in the Netherlands is more interesting and especially more sustainable because it is the only country that shows double-digit RevPAR growth over a 12-month rolling period, and with a very good ADR level. In periods of recovery and growth in demand, it is also observed that countries suffering from a deficit in hotel supply benefit from a great boom. Although temporarily beneficial, such markets must be careful not to allow this to become a long term structural weaknesses. Nevertheless, most of the European cities still benefits of an increasing trend in the RevPAR since the beginning of the year.