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Europe - May 2009 : no improvement in sight

The hotel industry is following a steady - but not positive- growth trend of -20%. The overall result is pulled down by mid and upscale categories. But the economy and budget segments are not doing much better.

May is generally very busy with strong business and leisure activity. And yet, the results of the European hotel industry in no way illustrate this classic trend. The RevPAR is down by 19.0%. Already last year, several countries such as the United Kingdom and Italy had begun to show signs of losing steam. Since then, the situation has gone from bad to worse. The crisis continues to primarily affect the 3 and 4*. The upscale is obliged to adopt an aggressive commercial policy to sustain an occupancy that continues to waver with familiar results (-21.6% for the RevPAR). The midscale segment must pattern its strategy af-ter that of the higher category. Although Europe’s hotel in-dustry had invested a great deal of hope in a ability of its 2* segment to resist, some of these hopes have been shat-tered: this category posts a drop in its RevPAR by –12.7% in May and –5.7% on the last twelve months. Even worse, these difficulties are beginning to spread to the 1* segment (-3.9%) which has no real maneuvering margins for rates to counter its drop in occupancy. Growth in the average daily rate by +3.6% does not offset the OR of –5.4 points.The Franco-German couple continues to be the locomotive, albeit weary, of Europe’s hotel in-dustry. Unable to boast brilliant results these two countries limit the drop in their RevPAR to a range between – 10 and – 12% for last May and bet-ween - 4 and -6% on the last twelve months. Despite an OR higher than 70%, the United Kingdom, the other important European country in this regard, is far from the results it had last year (-16.6%). With its 12 % drop, Poland offered more of a positive surprise last May. In Europe it is the only country with clear growth of its average daily rate (+5.7%). In Spain and the Netherlands, on the other hand, the summer sales started ahead of time. The terrible fight for a clientele that is increasingly scattered has produced a fierce price war. And, thus, with a drop in the RevPAR by more than 27%. Hungary and the Czech Republic are in an identical situation whereas the occupancy of their properties is down 15 pts. Between the best and worst elements, Belgium, Austria, Italy, Sweden have formed a leading pack operating at an average of –8 to -9 pts OR and –9% to -10% for their average daily rate.

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