A press release from MKG Consulting. As the summer season draws to a close, it's time to take stock, and the European hotel industry is doing well: despite numerous climatic hazards and rising inflation, European hotel activity is better than before COVID (+23%) and above all than last year, with RevPAR up by +7% compared with the summer of 2022. And while some regions have suffered because of the heatwave and fires, have other areas benefited?

The hotel industry is doing well

Although the European hotel industry has not yet quite managed to catch up with its pre-COVID levels, despite the climatic hazards in southern Europe that marked the start of the summer season, revenue levels have reached new records.

In fact, across the continent as a whole, July was a very good month. Hotel occupancy rates were up 0.2 percentage points on last year, which was already strong. Although occupancy levels did not return to pre-crisis levels (-3.8 points vs. 2019), the average European RevPAR reached a new high of €105.7 excluding VAT, i.e. +8.3% higher than last year, thanks to continuing increases in average daily rates (+8.1% vs. 2022, i.e. +31.3% vs. 2019).

The recovery was less marked in August, when occupancy rates remained stable and aveADRs rose again, but more moderately (+5.4% compared with August 2022).

In Europe, travel habits are picking up...

Across the continent, the results are positive, but not all countries have been in the same boat. Compared to the pre-covid period, Hungary and the Czech Republic recorded colossal increases in RevPAR due to considerable inflation rates, but "objectively" Italy is one of the European countries to have fared best.

CHANGE IN HOTEL PERFORMANCE IN JULY, AUGUST AND SUMMER 2023 COMPARED WITH 2022, BY COUNTRY

While the sector is in good health this summer, this is primarily due to the considerable rise in average daily rates. All countries are still recording a slight delay in visitor numbers compared to summer 2019, particularly in the north and east of the continent, where visitor numbers have nonetheless bounced back strongly compared to last summer.

... But not in the usual way

But while the desire to travel is returning, certain habits seem to have changed somewhat. Are tourists turning their backs on the beaches and southern Europe?

In fact, this summer, the Czech Republic (+12.1 pts), Hungary (+9.8 pts), the United Kingdom (+4.5 pts), Austria (+3.9 pts) and the Netherlands (+3.7 pts) recorded the highest growth rates in terms of occupancy. Conversely, the southern European markets recorded weaker growth or, in some cases, declines in occupancy rates, such as Greece (-1.4 pts) and Portugal (-2.2 pts). Extreme heat waves in southern Europe, and particularly the fires, may have contributed to tourists changing their minds about their holidays.

But due to widespread inflation, overall sales have jumped compared to the summer of 2022. The worst performers this year were Germany and France, with increases of 1% and 1.7% respectively, while Italy and the Central European countries posted double-digit revenue growth.

While Germany's under-performance can be explained by its gloomier economic and social context, France, Greece and Portugal are usually the driving forces behind activity in the summer season. But this trio of countries was also at the forefront of the recovery in the hotel market and formed the winning trio for summer 2022. The downturn in visitor numbers here follows on from an exceptional year. Above all, it shows that the post-covid catch-up effects are over; these countries have entered a new cycle.

On a more local level, tourists seem to have abandoned the coast, except in the north of the continent, such as in Germany and Poland, where they were very popular, with an increase in visitor numbers of more than 2 points in the occupancy rate. Conversely, in Greece, the coast (which is highly sought-after and therefore expensive, with prices rising sharply) was less popular, while the more affordable inland areas maintained their occupancy levels. The same is true of Italy, where the coastline lost visitor numbers compared with the summer of 2022: the sharp rise in RevPAR on the peninsula was driven by prices and a strong upturn in activity in its cultural, urban and mountain destinations.

COASTAL WEATHER: WHAT ARE THE TRENDS IN VISITOR NUMBERS?

CHANGE IN OCCUPANCY RATE VS. 2022 (IN PTS)

Summer in the metropolitan areas

In the end, it was the markets with strong links to major cities that performed best this summer. The Netherlands with Amsterdam, Austria with Vienna, the Czech Republic with Prague and Hungary with Budapest all posted considerable growth.

Amsterdam, for example, saw occupancy rates rise by more than +7 pts in July compared with last July, accompanied by a price increase of almost 10%, enabling the Venice of the North to record a RevPAR increase of almost 20% compared with July 2022.

Further north, Edinburgh (due in particular to the Edinburgh International Festival, held from 4 to 27 August) and London drove growth in the UK this summer.

And in markets where business growth was more modest, such as Germany, Munich and Hamburg also led the recovery, with increases in both visitor numbers and RevPAR.
This observation also bears witness to the return of international customers to Europe, particularly long-haul (Americans, Asians, etc.) and/or those with high purchasing power. Paris-Charles de Gaulle airport is a case in point, with over 6.5 million passengers in July, 9.2% more than last year.

WEATHER IN THE MAJOR CITIES: WHAT ARE THE REVENUE TRENDS?

CHANGE IN REVPAR IN JULY 2023 VS. 2022 (IN %)

Within each country, we can also see that the dynamics have changed: the return of foreign customers to certain destinations, the desire of many locals to travel closer to home and/or at lower prices, and new habits in terms of both destinations and scheduling have tended to change the usual holiday patterns.

CHANGES IN REVPAR IN FRANCE, GERMANY AND SPAIN IN SUMMER 2023 COMPARED WITH 2022

In Germany, it was the Hamburg region that recorded record levels of activity this year (+13.4% RevPAR/summer 2022), while in Spain, the Rioja wine region (+20.7%), at the foot of the Cantabrian mountain range in the interior of the country, attracted a great deal of interest. The fastest-growing regions are also often the least expensive, reflecting the impact of inflation on tourist travel.

As in the rest of Europe, Spain's major cities also tended to perform well, with Seville and Bilbao recording RevPAR growth of over 10% in July compared with the previous year. On the other hand, the country's two main drivers, Barcelona and Madrid, which are also known for their high levels of holiday traffic, saw their occupancy rates fall in July 2023 compared to July 2022, although this was more than offset by sharp price rises.

Similarly, in France, while the coastal regions and the south (particularly Corsica) underperformed, other destinations such as Ile-de-France and the Grand Est did very well (for more details: Summer 2023 results).
So, while the economic and social environment (inflation, climate change, questions about the way we travel, etc.) is uncertain, at the moment, people's thirst for travel is as strong as ever, and only habits seem to be changing.

Vanguelis Panayotis, CEO of MKG Consulting, said: "The summer of 2022 on the coast has given way to the summer of 2023 in the cities, driven by the return of international and high-budget customers. The European hotel market is thus posting record performances, but the countries that are furthest advanced in the recovery have already entered a new cycle, with prices still rising sharply but visitor numbers falling".