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August 2020: The slow recovery of the European hotel industry

The month of August confirmed the trend seen in July, which was characterized by a slight recovery of the European hotel industry, driven by countries with a larger domestic market, particularly France and Germany, while certain destinations and market segments more dependent on international tourism remain deeply in the red. 

Following an encouraging July for hotels, August confirmed the trend of a slight upturn for the sector in Europe. Despite historically low occupancy rates, with averaged 38.9% during August across the continent, the summer period thus was marked by a degree of recovery. 

Indeed, the occupancy rate increased by 6.5 points in August compared to July 2020, and the average daily rate (excluding VAT) and RevPAR (excluding VAT) increased by €6.3 and €7.3, respectively, to €87.1 and €33.8. Although these results are encouraging, their levels remain very low compared to those of August 2019: the occupancy rate fell by 36.5 points, the average price by 11.9%, and RevPAR by 54.6%. 

These results nevertheless confirm the positive developments of July, thanks to the easing of travel restrictions and the opening of certain borders. On the other hand, with the absence of non-European business and foreign customers, the mid and high-end segments remain more affected than the budget and economy segments. These two had occupancy rates of 53.1% and 42.3%, respectively, in August 2020, compared with an OR of 38.0% for the mid-range segment and only 29.6% for the high-end segment. The drop in the average price, which varies from 1.7% (budget: €50.7 excluding VAT) to 6.3% (high-end: €146.6 excluding VAT), results in a considerable drop in RevPAR ranging from 28.2% (budget: €26.9 excluding VAT) to 63.8% (high-end: €43.4 excluding VAT), even though the declining dynamics of price and revenue are moderating compared to previous months. 

 

Similarly, results have been uneven across specific markets. France and Germany, with their strong domestic customer base, recorded the lowest falls in Europe, with an occupancy rate down 22.7 points (to 49.0%) and 33.4 points (to 38.4%), and a RevPAR down 35.3% (€49.2 excluding VAT) and 48.8% (€30.1 excluding VAT), respectively. Conversely, other countries suffered from the absence of foreign customers, particularly the Czech Republic (-65.2 pts. of OR/ -84.7% of RevPAR), Hungary (-66.3 pts. of OR/ -79.5% of RevPAR) and Spain (-51.8 pts. of OR/ -72.1%), which recorded the largest declines.  

The United Kingdom recovered after experiencing a severe July, although its decline in RevPAR (-71.4%) was heavily penalized by the fall of its occupancy rate (-50.0 points), due to the policies implemented by the country. Its average price, which fell by 28.5%, reflected the impact of these measures on the upscale hotel sector. It should also be noted that Belgium (-49.4 pts. OR/ -69.0% RevPAR) was the only country whose average price stabilized over the period. 

The cumulative figures are nevertheless subject to the scope and magnitude of the crisis. In total, over the first 8 months of the year, the European hotel industry’s RevPAR fell by 62.4% (-26.4 € excluding VAT), average price declined 13.5% (84.7 € excluding VAT), while the occupancy rate lost 40.6 points (decline of 31.2%). However, the results for the month of August underscore the momentum observed since the beginning of the second half of the year, pointing to signs of a possible gradual recovery for the sector. But this was before the start of the new school year, which brings with it economic uncertainties and doubts surrounding the health situation in Europe. 

 

Trends Europe August2020Infogram

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