After a year 2014 marked by a rebound, 2015 appears to be entering a trend that is globally favorable to hotel activity in Europe. But the dynamics are expected to differ depending on country and segment.
MKG’s forecasts (download full reports here) for European hotel performance in 2015 fall within a context of progressive recovery of activity. Nonetheless, elements relative to international security, further to the events in Paris in January, or the tension in the Ukraine, could still have an uncertain impact on Europe’s hotel results. Today, different scenarios arise depending on the country, with changes in occupancy rate and average daily rate that are tied to the economic position of European countries in the expected economic recovery cycle.
The first scenario shows the recovery of the occupancy rate as well as average daily rates and currently suggested rates for 2015. This scenario applies to countries already entered a phase of economic growth and succeed in attracting a clientele that is both international and domestic, with the latter benefiting from growth in the GDP and domestic consumption. In the United Kingdom, the RevPAR is expected to grow by more than 5% with respect to 2014, which may be explained by a domestic economic situation that is more favorable than in other European countries, with growth in the GDP expected by more than 2% and a reversal in unemployment that should begin to result in an increase in buying power for British households. The positive trend expected in the United Kingdom in terms of RevPAR is in line with results of the past three years and may be explained by a dynamic demand, together with growth in the hotel supply for several years that gives the country a quality, modern supply and leverage to increase prices. Spain is another one of these countries where domestic economic growth is underway and that benefit from their affordability for international clientele, making it possible to increase their RevPAR through two levers: price and occupancy.
Other countries should experience a more moderate change in prices and benefit from the economic recovery initially leading to growth in occupancy and to a lesser extent an increase in prices. This will allow growth in the RevPAR while producing prices that are only slightly higher than in 2014. Italy and the Netherlands are part of this scenario, with a significant increase expected in their occupancy rates in 2015, while average daily rates should increase only slightly, or eventually stagnate, on certain segments in the Netherlands as the slight drop in rack rates for 2015 suggests. Thanks to renewed arrivals, particularly on segments that were previously more affected by the crisis, the change in the RevPAR in the Netherlands and in Italy is expected to be quite positive. It is nonetheless a national average, and in certain major cities with a strong leisure component or where certain segments began their recovery in 2013 (particularly upscale), the change in prices will be more significant.
Positive, but relatively moderate, growth can also result from growth stabilization after several years of steady growth, resulting from an increase in the available supply when results had already risen significantly. Germany falls into this scenario, and should thus experience more moderate growth in its hotel results in 2015 than countries in Southern Europe.
France should find itself in an intermediary situation, with a moderate recovery for its economy as well as for its hotel activity. This should result in a slight increase in occupancy rate as well as a slight change in average daily rate, and thereby make up for the increase in the VAT that was not fully passed on to clients in 2014: the monthly changes in the RevPAR having only begun to be durably positive starting in August.
Results of 2015 will nonetheless be quite different between Paris and the rest of the territory. In Paris, changes in occupancy rate and average daily rate are expected to be higher than in the rest of the country, with the capital benefiting from occupancy rates that are already high, a favorable events calendar 2015 (Paris Air Show, Bâtimat…), and dynamic international demand; however it also includes several factors of uncertainty: euro-dollar and euro-pound exchange rates, price of oil on the positive ride, and the psychological impact of the terrorist attacks at the beginning of 2015, that will have to be watched carefully throughout the year.
In other European capitals, however, changes in performance could be less important than in the provinces, which may be explained in part by the effects of technical rebounds. At the worst point in the crisis, when secondary markets experienced difficulties and results were down, capitals succeeded in maintaining their hotel activity. With the recovery, the territories that had experienced strong drops should benefit from the renewed activity. While the capitals remained in a steady and solid growth dynamic in the long term, growth in 2015 is expected to be more significant in secondary markets or segments that saw their results drop a few years ago. 2015: a year when the last will become first? Answer next year…
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This article is an extract of the 2015 European report
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