According to the German Hotel Association (IHA) annual Congress in Wiesbaden, first quarter results from the HotelBenchmark Survey by Deloitte & Touche reveal the dire performance of the German hotel industry…
According to the German Hotel Association (IHA) annual Congress in Wiesbaden, first quarter results from the HotelBenchmark Survey by Deloitte & Touche reveal the dire performance of the German hotel industry. The war in Iraq, the general decline in long haul travel and the impact of SARS combined with the weak German domestic economy, have all conspired to put increased pressure on occupancy and average room rates for the country’s hoteliers.
The results for the first quarter of 2003 show that the revenue per available room (revPAR) fell for the ninth consecutive month continuing the downward trend that began in July 2002. During the first three months of 2003 all German hotels reported a revPAR decline of 5.3 percent, which resulted mainly from a decline in average room rate. Room rates (net rate excluding breakfast and VAT) fell 4.5 percent to reach € 85 during the first quarter, however occupancy levels held up well with all German hotels only experiencing a 0.8 percent fall in demand compared to the same period last year. This trend contrasts sharply with the experience of the industry during 2002 when generally average room rates held up well, whilst occupancy levels came under severe pressure.
Commenting on the results Julia Felton, a director in travel, tourism & leisure at Deloitte & Touche said: “We are not surprised to witness this decline in average room rate in the German market during the first quarter of 2003 as corporate buyers have a significant influence on hotel prices. Given the poor economic conditions in the latter part of 2002, during the re-contracting period, it was always likely that room rates during 2003 would come under more pressure than that witnessed during 2002. March marks the sixth month of reductions in average room rates and early indications are that the decline in April will reach double digits.”
The decline in occupancy and average room rate has contributed to a fall in hotel revenues with the 300 hotels that participate in the monthly HotelBenchmark Profitability Survey by Deloitte & Touche reporting a 3.8 percent decrease in revenue on a per available room basis. This has converted into a 6.6 percent fall in Income before Fixed Charges (IBFC) during the first quarter of 2003. On average all German hotels earned € 2,015 per available room in the first quarter 2003, compared to € 2,158 per available room in the first quarter of 2002.
The reasons for the continuing decline in hotel performance vary. Notwithstanding the general poor global economic conditions, the German hotel industry has witnessed a continual decrease in the number of American visitors, in particular, post the terrorist events of September 11. This combined with the weak US Dollar relative to the Euro has made Germany and its European neighbours a less attractive travel option than may previously have been the case. The problem for German hoteliers is further compounded by the weak German economy, which is impacting inter-regional travel, particularly business travel to urban centers. The health of the domestic economy is an important factor for the German hotel industry since German nationals account for nearly 86% of overnight stays in hotels. Latest data from the German Statistics Office reveals that the number of overnight stays of German nationals declined by 4 percent to 30.3 million overnight stays in January and February 2003 compared to overnight stays by foreign visitors which declined by 2 percent to reach 4.7 million overnight stays.
Commenting on the results Bernd Geyer, Chief Executive Officer of the German Hotel Association (IHA), who endorse the HotelBenchmark Survey said: “Overall German cities hotels are continuing to under perform when compared with other European cities, and the outlook for the German hotel market in 2003 does not look promising. The resolution of the conflict in Iraq may prompt some foreign leisure and business visitors to resume their travels, however the continuing weak economy in Germany, the EU and the United States will dampen any more positive outlook. Nevertheless the hotel industry is optimistic that more German travellers will opt to stay in Germany for their holidays this summer, which should at least benefit the holiday regions.”
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
