Forecasts 2014: growth should be confirmed for Europe’s hotel industry and begin in France

After improved performance for Europe’s hotel industry in 2013 (despite a drop in France), stronger renewed demand and average daily rates up in recent months see 2014 off to a good start. The year should be characterized by an improved economic situation on the continent resulting from moderate recovery of international exchanges that should influence the hotel sector. Revenue per available room at hotels should thus continue to grow at a rate close to 2.9% according to estimates from MKG Hospitality for the biggest markets in Western Europe.

After improved results for the Europe's hotel industry in 2013 (despite a drop in France), the stronger renewed demand and average daily rates that are up again on the last months show 2014 off to a good start. It should be characterized by improvement in the economic situation on the continent, driven by the moderate recovery of international exchanges, and influence the hotel sector. The revenue per available room at hotels should thus continue to grow at a rate close to 2.9% according to estimates from MKG Hospitality for Western Europe's biggest markets.

While it was an exception in 2013, France should follow the same trend as its neighbors and regain a growth track in 2014, in light of the gradual economic recovery expected across the year in the country. Its growth will nonetheless be more moderate than that of its compatriots and forecasts show growth in the revenue per available room at hotels that are still below European standards. While demand should allow hotel occupancy to improve, growth in average daily rates excluding tax will remain relatively weak as the VAT grew by three points in January. The increase in prices in 2014 will thus be mostly driven by the favorable evolution of clientele mixes and international clientele, particularly in Paris, Ile-de-France and cities with an international airport.

Germany and the United Kingdom should continue to figure among the most dynamic economies in Europe, with expected growth in their GDP that should create a favorable context for their hotel activity. In Germany, growth in demand supports hotel occupancy and average daily rates in 2014. Despite the important expansion of its hotel supply in recent years, the United Kingdom has high occupancy rates that should make prices and sector results grow in 2014.

The recovery observed in 2013 in Southern Europe should be confirmed in 2014. Hard hit by the economic crisis on the continent, Spain and Italy will move continue to progress as their situation improves. Although its results fell very low in recent years, the Spanish hotel industry is regaining the growth track in a context in which its supply is stabilizing. The year 2013 ended with a rebound of occupancy at its properties, which should continue in 2014 and will encourage an increase in average daily rates. As average daily rates at Spanish and Italian hotels have been on a downtrend for several years, their levels are now significantly below those in other major Western European countries and make the hotel supply competitive again, which should support their growth. MKG Hospitality thus expects these two Southern European countries to achieve stronger growth than Northern European countries in 2014.

In the Benelux area, the Netherlands should experience a slight increase in hotel performances, thanks to demand from its European neighbors in an economic context that is stagnant or experiencing very slow domestic growth. Finally the change in performance of Belgium’s hotel industry should regain a growth track in 2014, driven by exportation and renewed dynamism of domestic demand.

Aside from exceptional events, the uptrend of European hotel performances should continue and even accelerate in 2015, particularly in France where the effects of the recovery will begin to be felt more on the economy and thus on the hotel industry.