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Analyses

Europe - July: a dismal beginning

Despite the arrival of the first summer vacationers, Europe’s hotel industry is not back on track. Results throughout Europe the trend of the previous months with a drop in RevPAR by 14.5%

Hoteliers awaited the onset of the summer season anxiously. Would its save them or, on the contrary, accentuate the drop in room revenue? In the end, July kept the pace of a year that began badly with results that were not as good as hoped, but not as bad as feared. The evolution of the room revenue (-14.5%) is in line with the last 12 months (-13.5%). Paradoxically, in these times of crisis, it is the budget hotel segment that is disappointing with a drop in its RevPAR by -13.4% versus –8.1% on twelve sliding months. Occupancy was down by –8.1 pts. The 2* category suffered from competition with the two categories above it. The average price difference with respect to the midscale range is just over 10 euros. Promotions have also helped sustain business in the upscale segment. And as the ADR slipped by -12.1%, occupancy was down slightly – at least in terms of the current situation – by -2.9 pts). The upscale segment, which had got used to drops by close to 20% is not so embarrassed by its performance (-15.9%). It was kept afloat by the marked leaning towards vacations at nearby destinations by a clientele with high incomes and, in certain major cities, by Middle Eastern clientele who are traveling earlier due to Ramadan.Foreign clientele are down, local tourism is up: this little game has communicating basins, Sweden is the great winner (+1.9%). The charms of the Scandinavian country with fine days have seduced many local clientele. The OR is up by 4.0 pts. On the other hand, highly traveled countries are among the great losers. The Czech Republic (-18.9%) and Spain (-21.2%) continue their descent. And yet, for the latter July was only slightly impacted by ETA’s attacks that affected Majorca. Whereas the nights of Spanish tourists remained stable at the beginning of the summer, foreign clientele, British in particular, fell short. Despite hoteliers’ efforts in terms of prices, nights dropped by 9% according to official reports. Another tourism star, Italy kept its business afloat (-1.6 pt) thanks to intense promotions (- 10.3% of the average rate). In the United Kingdom, this strategy bore no fruit. The average price posted a drop by more than 12.0% but this drop had only a limited impact on the OR (- 4.9 pts). Poland and Hungary, on the other hand, opted for an ambitious price policy. Happily so since these two countries produced above average results.

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