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Europe: do market trends forecast a major rebalancing?

At the 21st edition of the Global Lodging Forum held last April 10 and 11, Vanguelis Panayotis, President MKG Consulting, presented hotel market trends worldwide and the evolution of results in Europe in recent years.

Global tourism is currently undergoing strong growth and should continue to progress in the years to come. The World Tourism Organization foresees steady growth in the number of international tourist arrivals through 2030 worldwide. Passenger traffic at primary airports in particular (source Airbus) should also continue to grow significantly until 2034, suggesting a good future for hospitality. In a context where the supply is growing do hoteliers see a serene future for the hotel industry? 

Global hotel supply trends

Between 2001 and 2006 the market share in terms of supply in the United States shrank, whereas it continued to grow in Europe, Asia, and Latin America. Between 2011 and 2016, the market share in Europe and the United States is shrinking continues to weaken in the other regions, that are not as mature. the supply in Asia in particular is growing rapidly and in 5 to 6 years should be positioned between Europe and the American market.

As for growth in supply, there is a correlation between the evolution of the supply in terms of number of rooms and the GDP. The United States has the biggest GDP and thus the biggest supply in terms of rooms. The country members of the G7 follow (Germany, Japan, France, Canada, Italy and United Kingdom) and then the BRIC countries (Russia-Brazil-India-China). On the other hand, there are economies where resort tourism drives the GDP in particular in Thailand, Egypt, Greece, Morocco and Tunisia. Nigeria, South Korea, India, Japan, and China all have fine futures ahead. With its current RevPAR index China should soon surpass the United States.

With a penetration rate of +1.2%, the United States is a mature market. 72% of the hotel supply consists of branded hotels. Asia is the zone with the strongest growth, with a market share growth at +11% for the global supply. It is currently ahead of Europe with a 54% penetration rate for chains. Growth in Europe is by +2%, which is a steady rate that is more dynamic than that in America. However, the penetration rate of chains in Europe is only 37%. Latin America, meanwhile, experienced a small boost from athletic events organized in Brasil, but the chain supply is essentially in North America, Western Europe and China. 

Change in hospitality results in Europe

In the last sixteen years England has been the European country with the strongest growth in its RevPar (Revenue per available room), particularly thanks to the Olympics. A generally favorable observation may be made for France, which is second ahead of Germany. In 2007-2016, growth in the RevPAR in Europe reached +27%, versus +23.3% between 2003 and 2007. The trend is positive throughout the year 2016.

Close examination of the RevPar indexes on the period 2007-2017 show a slump in Belgium and France caused by the security situation. Spain, England and Germany surpass France. In 2015-2017, growth in France is by just +0.1% due to the terrorist attacks and the economic situation, while growth throughout Europe is close to +4.8 %. Overall in 2015, all the indexes were positive in European countries, especially in Southern Europe. 

In 2016, growth was by only +0.8% in Europe, and the RevPar in France posted a slump by -5.1%.  It  should be recalled that just over 50% of all of France's hotel industry revenues come from the Ile de France and PACA regions. The overall performance on the territory performance was thus severely impacted by the attacks in these regions. In the rest of the provinces growth in the RevPar reached +4.4% in 2016.  Major disparities are arising between the different markets: Paris and PACA are not the only growth engines for the RevPar in the country; hotels in the provinces are able to soften the impact of the attacks.

At the beginning of 2017, positive results could be seen throughout Europe. At the end of 2017, Europe shows +7.1% growth in the RevPAR. Belgium has not fully caught up, but summits organized in Brussels will help it do so.

Overall, the average occupancy rate in Europe is 69.8%. Certain countries are nonetheless not following that logic, particularly France and Belgium, but this situation is first and foremost related to terrorism rather than a lack of dynamism in demand. The other European countries post very high occupancy rates.

The Iberian Peninsula and Greece are especially attractive to international clientele, particularly English, because these markets do not have many activities or domestic clientele. For the moment Brexit does not appear to have a negattive impact on hotel performance in these regions. The United Kingdom, Ireland, the Benelux, France and Italy are countries with a high proportion of American clients. Putting aside recent political events, the current exchange rate offers a favorable context for clientele tor return to the continent.  

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