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Europe: a drop in the REVPAR in April was to be expected

Europe’s hotel industry had not seen a drop in its RevPAR since August 2005 (-5.1%).The drop reported this April (-2.6%), although relatively moderate for Europe, nonetheless hides major disparities from one country to the next.This drop was foreseeable, however, and does not alter the overall positive trend that Europe’s hotel industry has undertaken.

It would be difficult for results to be more varied than they were this last April. France and the Netherlands post distinct increases – close to 10% - in their revenue per available room; Germany and Nordic countries reported diametrically opposite results with drops by 15% and more. In this black and white picture, it is the negative that tips the balance so Europe posts a drop (-2.6%) for its RevPAR. Occupancy is not to blame in this apparently temporary slump, as it is down only slightly by 0.1 points. The average daily rate, instead, is under pressure. Mid and upscale properties have suffered in particular. Their average daily rates are down by -3.6% and -2.9% respectively. And the RevPAR for the 3* category shows the strongest drop (-4.8%). While results were very disparate geographically, so were that from category to category. There is a clear difference in results between higher and economy categories. The latter continues to prove that it is in fine fettle. Average daily rates and occupancy rate progress in unison from 0* to 2*. And the prize goes to the 1* segment where the revenue per available room rose by 9.1%.Despite April’s slump, the trend remains positive across twelve rolling months: +2.5% for the RevPAR. It was the average daily rates, which were in difficulty in April, that succeeded in coaxing growth out of the overall RevPAR thanks to 1.4% growth. Occupancy, meanwhile, rose by 0.8 points. Then it is the Mediterranean countries (France, Spain, Italy) that posted the best results in Europe in the mid-term, with exception to Austria. Now there’s an excellent harbinger for the summer months.Why was this April so difficult? The first part of the answer: the calendar. Unlike last year, Easter was in April. From country to country, the reaction to the economic slump traditionally reported for this holiday of year was different. But the primary explanation for these bad results lies in the exceptional performance of Europe’s hotels in April 2005, when Europe posted the best results in five years, flirting with double-digit growth in its RevPAR (+9.8%). To find similar results, it is necessary to go back to September 2000.April 2006 thus suffers from its comparison with the year 2005. The countries that post record lows this year are the same ones that posted equally impressive highs last year. Rather than reiterate 22.7% growth, Germany fell by 13.2%. Its seminar activity was slower and there weren’t as many congresses. For example in 2005, Cologne (+142.1%) had outstanding results and Düsseldorf (+123%) achieved similar results thanks to the Interpack salon held there every four years.Nordic countries did not experience the same astronomical performances as last year either: +55.1% in Denmark and + 41.2% in Sweden in 2005. In comparison, April 2006 was pretty glum with -35.9% and - 28.0%. And the impressive drop in average daily rates combined with an occupancy rate that was also down. Although Eastern European countries were also down, their situations are very different. Hungary (-1.4%) succee ded in compensating for a drop in its occupancy rate with average daily rates that were up. The Czech Republic instead (-17.4%) was unable to halt the constant drop of its average daily rates (-10.4% on twelve rolling months) despite an OR higher than 80%. Finally, Poland (-15.7%) continues to suffer from average daily rates that are lower than average.Fortunately, not all countries had such a bad month last April. Spain progresses steadily (+2.3%) month after month, confirming that the country is absorbing the overcapacity that had penalised hoteliers for several months. The United Kindgom, meanwhile, succeeds in stabilizing its results (+0.2% for the RevPAR).Despite April’s slump, the trend remains positive across twelve rolling months: +2.5% for the RevPAR. It was the average daily rates, which were in difficulty in April, that succeeded in coaxing growth out of the overall RevPAR thanks to 1.4% growth. Occupancy, meanwhile, rose by 0.8 points. Then it is the Mediterranean countries (France, Spain, Italy) that posted the best results in Europe in the mid-term, with exception to Austria. Now there’s an excellent harbinger for the summer months.

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