European hospitality results 2011: between satisfaction and a question mark

It is important to observe that for the 27 countries in the European Union, the results of the hotel business for 2011 are positive. No country closed the year with a downturn for its reference indicator (the RevPAR) even if there is a broad range between stabilization in Sweden (+1.8%) and strong improvement in Poland (+9.3%), which occasionally benefited from its presidency of the Union. The European countries with the strongest hotel activity (United Kingdom, France, Germany or the Benelux) are positioned within a tighter range: between 4.5% and 6% growth, which better reflects the state of Europe’s marketplace.

With an average European occupancy rate higher than 66%, hotel occupancy gained two points over 2010, which was already in a strong recovery after the crisis of 2009. The leaders are the international gateways, capitals and business cities: Amsterdam, Berlin, Hamburg, London, Munich or Paris, which flirt with or surpass an OR of 75% across the year. With an OR close to 85% London beats all records, and is close to saturation, stimulating the whole of UK’s performance with 75%. At the bottom of the table is the OR in Italy, Spain and Poland which reflect the difficulties of the national markets. The only two drops in occupancy with respect to 2010 (Sweden and Austria) are less than 1.5 point.

This strong demand justified a significant improvement in the average daily rate (over 2.5% for the whole of Europe), with higher performances, around 6%, in Austria and Portugal. Generally speaking, it is the good results in upscale hotels that have allowed this progression.

The question mark bears on the slump observed in year-end business. The downturn of growth in the RevPAR since autumn 2011 was not brought to a halt by Christmas celebrations and the level of business in December 2011 dropped back below that of December 2010. While marginal, this drop in the RevPAR by 0.9% brings to a close nearly two years of positive change after the severe shakeup in 2009.

Globally in Europe the two business indexes came to a halt in their uptrend and it may be feared that the negative result of December 2011 will continue in the early months of 2012.

However, not all of Europe has swung as a whole into the red, and contrasting situations persist in two countries with a strong hotel capacity –France and Germany– where the RevPAR continues to progress slightly but at a rate slower than that at the beginning of 2011. In the same way, Central European countries are also progressing, particularly Poland, the Czech Republic, Austria and Hungary, but at relatively low performance levels.

Highly dependent on international clientele, the Benelux countries, as well as the United Kingdom, already posted negative growth since last November, entering the downturn a bit earlier, particularly thanks to a significant drop in average daily rates. The capitals resisted better, especially London, but the weight of the other regions, which were hit hard by the effects of the financial crisis, has a strong impact on national results. Countries in southern Europe, which also prematurely sank into the debt crisis of the different states, were impacted by the kickback of a failing economy and an obvious drop in business travel.

“The beginning of 2012 looks rather difficult, but we remain confident that there will be a positive RevPAR growth over the entire year, between 2% and 4%” commented Georges Panayotis, President of MKG Group. “The Olympics in England will positively affect the second semester 2012 in a chain effect while the calendar for trade shows in Germany is looking good. The question lies on the ability to maintain a positive economic growth, which feeds the number of business trips.”

The President of MKG continues: “In a major country like the United States, tourism has become a strategic economic stake, as President Obama has indicated. Over there, hotel groups unite to fight against third party domination found on the web that is operating a true hold up on hotel distribution and the business activity of many hotels. We are waiting for the same thing to happen in Europe: a continent whose Airbus sales surpassed Boeing’s. National policies are still too shy to encourage the development of hotel supply. In all of Europe, the supply is stagnant, even regressive, and absolutely needs to be stimulated.”

Kindly note that MKG Hospitality will present a detailed statement of French, European and worldwide hospitality activity, and will give the main trends for 2012 during the next Global Lodging Forum which will be held on 12 and 13 of March at the Bristol Hotel (Paris - France). For further information, please follow this link. Please note that only limited places are still available. Register ASAP.

MKG_PR_Report_Europe_2011.pdf (846.6 kb)