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October 2017: this fall Europe’s hotel industry follows a slight uptrend

The good performance of the hotel business continued in October across all the leading European destinations, confirming the recovery observed since the beginning of the year. This may well make 2017 a record year for the continent.

October ended with a new 4.7% increase in RevPAR in Europe, after +5.8% in September and a marked improvement in performance month after month since the beginning of the year. The occupancy rate gained 1.2 percentage points, to reach an average of nearly 76% for all Continental destinations, while average daily rates rose by 3.1%.

In terms of occupancy, the dynamic is more favorable to the budget segment (+2.1 points), which confirms the resurgence of demand on this segment that has been somewhat unsettled in recent years. The higher the range, the lower the increase in occupancy rates, with upscale hotels gaining "only" 0.7 points compared to the same date last year. This segment already has the highest occupancy rate, at more than 77% in October 2017. Average price dynamics were the opposite: from 1.9% in the budget segment to 4.1% in the high-end hotel segment, which benefited from its solid attendance. In the end, the RevPARs of the various categories show very similar trends between 5.0% and 5.3% for the budget, economy and upscale categories. Only the mid-range segment experienced a slight decline (+3.8%).

The positive momentum remains widespread in all countries. Portugal is taking advantage of its improved economy and the appeal buoyed by European international customers to boost both its occupancy rates (+2 points to 83.7%) and its average daily rates, which experienced further growth by 20.7%, for a RevPAR up by almost 24%. Southern Europe recorded significant increases in RevPAR as it did in September. This is particularly evident in Italy (+9%) and Greece (+12.9%). In addition to the return of business customers with the improved economic situation, these destinations also benefit from leisure customers (to the Venice Biennale in particular). Spain, on the other hand, with its concern regarding the Catalan question, returned to the top of the list in October with a drop in occupancy. Barcelona, in particular, which had been very resilient even after last summer's attacks, suffered this time from the referendum's impact on the economy and tourism, causing some large companies to relocate their headquarters from the Catalan city; its RevPAR fell by 12.1% in October.

Meanwhile in the north, Belgium benefited from a comparative effect with respect to a deteriorated base following the attacks in 2016. In October, it ranked second in Europe behind Portugal. Occupancy rates hover around 80%, up 6.5 percentage points, and average prices rise by 6.4% for a 16% increase in RevPAR. The neighboring Netherlands is also buoyed by the business activity of this fall season. At a time when the capital city of Amsterdam has just been designated to host the European Medicines Agency, RevPAR is up by 8.5% and occupancy rates average 83.6% per month.

In October 2017, Germany and the United Kingdom recorded moderate growth. In the United Kingdom, RevPAR is still growing due to higher average prices, but occupancy levels have reached a ceiling. The positive effects of improved price-competitiveness, linked to the weakness of the pound sterling, were less pronounced in these months of strong business activity than during the summer period, which was conducive to leisure travel. Germany also experienced a mixed October with a decline in occupancy rates, confirming the slowdown forecast for year-to-date results, when the increase by 0.7 points for the occupancy rate and a 1.2% rise in the average daily rate led to a 2.1% increase in RevPAR. These results, barely in line with the country's economic growth, could signal early signs of a maturing hotel development cycle characterized in recent years by strong parallel growth in supply and demand.

In the end, October confirmed the general recovery of the hotel business in Europe. RevPAR year-to-date at the end of October rose by 5.6%, reflecting a return to activity after the sharp drop recorded in 2016. Above all, the overall occupancy rate reached nearly 73% at the end of October and appeared to be on its way to surpassing the 70% mark on an annual average for the European Union as a whole. This would be the highest level since the early 2000s. This is already testament to the current solidity of the sector's fundamentals after the crises of the past few years.

 

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