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Analyses

Summer 2021: The European hotel industry on a path to recovery

European hoteliers had been hoping the pickup in vaccination rates and progressive removal of health restrictions would boost demand this summer, as it did in 2020. Wish granted: hotel activity accelerated (+68.0% in RevPAR between July 1 and August 21 compared to 2020 marks), even though it remains well below pre-COVID standards (-31.8% compared to the summer of 2019). The impact of the COVID-19 crisis on the hospitality industry is now ebbing down, but this dynamic does not wipe out the strong disparities between countries and areas.

This summer, vaccinations and health passports have enabled hotels on the continent to host a hefty chunk of their domestic and European clientele. Compared to 2020, performance in 2021 is up in all European countries, not only in terms of Occupancy Rate but also in terms of Average Daily Rate and RevPAR. The Occupancy Rate climbed by 17.7 points from 2020, crossing the symbolic 50% threshold (to 52.2%). Revenue per Available Room reached €51.8 between July 1 and August 21, a 68.0% increase from 2020.

However, despite this rebound, performance remains well below pre-Covid levels: over the summer, European hotel revenue per room stood -31.8% below summer 2019 levels.

A multi-speed recovery

Summer 2021 : Change RevPar from July 1st to August 21th, change in % from the same period in 2019

1Source : MKG_destination

However, all European countries did not experience the same recovery pattern, with RevPAR trends ranging from -20.4% in France to -62.8% in Hungary. There are multiple underlying causes:

  • Roadmaps to ease restrictions and provide a route back to a “normal” way of life were different from one country to another. For instance, while domestic and continental transportation was already largely normalized by the beginning of the summer in Greece and France, in the United Kingdom quarantine following arrivals stopped only on July 28th, and in Portugal, the final stage of easing sanitary measures began on August 1st.
  • The weight of Leisure travellers: in these summer months, holidaymakers have been the core driver of hotel demand across the continent, notably supporting hotel activity in Mediterranean countries (Spain, Greece, Italy, France - then Portugal from August).
  • The importance of domestic guests in the national hotel market. Their share is predominant in France, Germany and Poland, whereas it is very limited in Hungary, Czech Republic and Benelux.
  • And on top of that, local holiday schedules. This factor particularly affects Italy, where holidays last until mid-September. This explains why the hotel industry was still in the doldrums in July (RevPAR -50.5%) but then delivered the strongest performance in Europe: from August 1st to 21st, hotel revenue stood only -5.1% below August 2019.

Coastline hotels shining out, driven by domestic demand

Disparities in terms of hotel performance can be observed at the national level but are even stronger within countries. In fact, RevPAR in European seaside hotels this summer reached €96.0 excluding VAT, 70.7% higher than in 2020 and only -12.8% lower than in 2019. On the contrary, over the same period of time, RevPAR in non-seaside areas was € 45.7 excluding VAT, still -38.2% below 2019 levels. Indeed, the pandemic-induced hotel crisis is now affecting inland areas more strongly, as they are more dependent on business tourism. Conversely, coastlines can rely on a leisure clientele now eager to travel and with the purchasing power to do so.

Summer 2021 : Hotel Occupancy rate by location, average from July 1st to August 21th

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Change in hotel revenue, RevPar change in % from 2019, July 1st to August 21th

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Source : MKG_destination

In some countries, the occupancy rate in seaside hotels almost climbed back to pre-crisis levels (-3.1 points in France, -4.4 in Germany and -4.8 in the United Kingdom) and exceeded 80%. In terms of RevPAR, during summer 2021 coastal areas in some countries even beat their pre-COVID levels, with +13.8% in Germany, +12% in the United Kingdom, +7.2% in France and +10% in Poland.

Many clients from the traditional northern European source markets chose to spend the summer by the sea in their own countries, even though many also returned to their usual sunny destinations in the Mediterranean countries. As a result, this strong demand pushed up average prices in resort areas, where the supply is limited.

Urban regions are most penalized by the crisis

More dependent on international and business travellers who have not got back to their pre-crisis levels, the major cities are still the most affected by the health crisis. In Germany for example, the regions dominated by Frankfurt, Berlin, Düsseldorf and Munich did not so well this summer: their RevPAR levels declined by more than -25% or even -50%. Spain with Madrid, Barcelona and Bilbao followed the same trend, as did France with the Parisian region lagging well behind the others.

In contrast, in leisure-oriented regions RevPAR levels climbed higher than in 2019. This is the case for some coastal regions, such as the Baltic Sea coastal regions of Schleswig-Holstein and Mecklenburg-Vorpommern in Germany, the Provence-Alpes-Côte d'Azur, Pays de la Loire and Bretagne in France, and of Galicia and Asturias in Spain. It is also the case for inland regions with little exposure to international customers, such as Thuringia in Germany, Extremadura and Castilla y León in Spain and Occitanie in France.

Change in hotel revenue in France, breakdown by region. RevPar change in % from 2019, July 1st to August 21th

fr

Source : MKG_destination

Change in hotel revenue in Germany, breakdown by region. RevPar change in % from 2019, July 1st to August 21th

deSource : MKG_destination

Change in hotel revenue in Spain, breakdown by region. RevPar change in % from 2019, July 1st to August 21th

spSource : MKG_destination

What conclusion, and what next?

Across Europe, summer 2021 has therefore seen a significant improvement in hotel activity, following a difficult first semester. Overall, from January 1 to August 21, 2021, (including summer), hotel revenue in Europe fell by between -50% and -80%, depending on the country, from pre-COVID standards.

Spain, Greece and France, thanks to their solid summer season and the greater weight of this period in their annual revenues, are currently posting the best results in Europe whereas Czech Republic, Hungary, the Netherlands and Belgium are still down by more than -75%, i.e. their hotel revenues have been divided by 4 in 2021 compared to pre-crisis marks.

Change in hotel revenue RevPar, RevPar change in %, 2021 vs 2020

7Source : MKG_destination

Notwithstanding, the situation is improving everywhere, with declines in activity that rose back above the -50% threshold over the summer. The rebound is even faster in some countries, such as Italy : the country lost -65.8% of its hotel revenue over the first 8 months of 2021 but cut its losses to -31.1% over the summer and merely -5.1% in August.

Therefore, since the beginning of the epidemic hotel performance in Europe has never been so close to its pre-COVID levels:

Hotel occupancy rate in Europe (EU + UK), before and adter COVID

9Source : MKG_destination

Vanguélis Panayotis, CEO of MKG Consulting, explains:

"Thanks to European holidaymakers, the summer has brought a welcome sunray to hotels on the continent, especially those on the seaside. But the year remains difficult and the return from the summer holidays will be another moment of truth, as 10 months out of 12 the hotel industry remains primarily dependent on business clients and business events, two key segments that so far remain below their pre-COVID levels of activity."

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