FORECAST: Activity forecasts for key European hotel markets, on the verge of a new cycle? Part 1.

Germany: good resilience of the hotel market

While more than 76% of overnight stays are generated by the German domestic market, and its economy therefore remains the main driver of hotel activity, the number of international tourist arrivals has nevertheless increased sharply since 2009. German urban destinations are also very dynamic on the MICE market, which represented more than 10 million visitors per year for 38.9 million international arrivals in 2018.

As of 1 January 2019, the German hotel market had a record number of more than 860,000 rooms (source: European Hospitality Report - MKG Consulting), driven by the significant development of the branded properties in recent years. However, this significant growth in supply (+4.4% in 2019, with a 2.6% increase in the overall market), which is expected to continue in the short term, is also a factor limiting performance gains. It could even cause a reversal if demand growth were to slow too much or even contract.

But the key German markets are showing good resilience, despite a rather unfavourable economic situation since the beginning of 2019. Over the full year, it is in the midscale segment that the best growth in RevPAR is expected, due to a catch-up in this category, which over the past five years has grown less in terms of supply and demand (less new hotels, more exposure to secondary markets or second-choice sites in key markets). Economy and upscale segments should see their occupancy rates remain higher in 2019 and 2020, despite some convergence between categories.

Overall, 2019 is therefore shaping up to be a satisfactory year in view of the country's economic situation, which has had little impact on business tourism, as the destination remains highly receptive to events. Slight increases in occupancy rates and average prices should combine...