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Within a very difficult context, a limited drop has been seen in 2003 for the European hotel industry

Only an overall drop of 2.9% in RevPAR within the European Union, at the end of November 2003, showed the report of MKG Consulting

Only an overall drop of 2.9% in RevPAR within the European Union, at the end of November 2003, showed the report of MKG Consulting, despite the accumulation of unfavourable factors. Austria (+6.1%), the United Kingdom (-0.5%), and Italy (-1.8%) are at the top of the European podium. France is added to this classification with a performance of -2.5% in RevPAR over the last 12 months. The budget categories once again show tough resistance.

Among the major points of the year, the most significant were:

Over the last 12 months, the RevPAR of the European Hotel Industry fell by 2.9%

Due to a drop in the average room rates by 0.7%, and in the occupancy rates by 1.4 points, the overall RevPAR recorded a fall by 2.9% for the European Union at the end of November 2003 over 12 rolling months. Within the context of a growing supply (reminder: +3.7% in 2002 vs. 2001), the several unfavourable events that occurred this year: the war in Iraq, the SARS epidemic, a dollar steeply down versus the Euro, American and Asian customers little inclined to embark on long-distance trips, and a large slowdown in economic activity. Consumers, by increasingly preferring to make last-minute reservations, notably via internet sales channels, have also contributed to the reduction of the visibility of operators in the sector. The upmarket hotel industry suffered the most from these events (-3.7% in RevPAR). The drop in the average room rate, observed in the 3* and 4* categories, is a result of two factors: Sales policies have often been more flexible and have allowed rates to be negotiated downward on the traditional business mix of these properties. The other factor: the opening of distribution channels that look to attract new customers. This has led to a modification of the customer mix, with a greater proportion of segments offering lower rates (groups, tour operators).

The European budget categories show strong resistance, thanks to the rise in average room rates

In that which concerns the budget categories, even though the occupancy rates show greater drops than in the 3* and 4* categories, the adjustment of the average room rates, very clearly oriented upward, has assured maintaining or increasing RevPAR. The hard-budget (0* and 1*) hotel industry notably posted a positive change in RevPAR at the end of November 2003 of 2.0% and 1.9% respectively, thanks to continued large increases in average room rates (+6.2% for 0* hotels, and +5.0% for 1* hotels). With a drop in RevPAR of 0.9%, the 2* hotels ended the year at equilibrium versus the preceding fiscal year. These segments rely on continually present domestic customers. The occupancy rates reach 68.5% in the 2* category, 71.0% in the 1*, and 72.0% in the 0*, despite a significant rise in the supply in recent years.

Austria is within an improvement phase, while the United Kingdom remains steady

An optimistic breeze has been felt in the Austrian hotel industry in 2003. After a difficult 2002 (-4.7% in RevPAR), Austria quickly changed directions and posted an excellent rise of 6.1% in RevPAR. The occupancy rates (+1.7 points) and the average room rates (+3.5%) are growing well. In the United Kingdom, the performance of the hotel industry has maintained steady revenue per available room, slightly down by 0.5%. A fall of only 0.3 points in occupancy accompanies average room rates that have remained stable from one year to the next. The levels of occupancy rates in the United Kingdom remained particularly high and steady that year. To the contrary, the Netherlands have recorded the largest fall in activity in the European Union, since the revenue per available room lost 11.9% versus the previous year over the same period. The German hotel industry, for which the RevPAR has already lost 5.2% in 2002, should finish this year once more on the decline. However, this degradation should not be as pronounced as it was in 2002: it appears to have gained ground at the end of the year. At the end of November, the revenue per available room over 12 rolling months recorded a 3.4% fall. After results that were strongly down at the beginning of the year (-27.4% in RevPAR in April 2003 versus April 2002), a recovery in activity seems to be the case in recent months. The German corporate chain hotel industry nevertheless remains marked by particularly low occupancy rates.

France, at the top of the European roster in 2002, comes in at 4th place this year in terms of RevPAR

France has seen a fall in revenue per available room by 2.5%, despite a rise in average room rates of 1.6%. The occupancy rates are down by 2.8 points. However, these results are better than they appear. In 1991, year of the first war in Iraq, which constitutes a reasonable point of comparison with regards to the current situation, French hoteliers recorded a drop in RevPAR of more than 9%.Similar to the situation seen in Europe, the budget and hard-budget hotel industry in French plays the role as a buffer. Revenue per available room in the 0* and 1* categories thus rose by 1.6% and 2.3% respectively in France. These categories, much less affected by the changes in the economic situation and international events, have allowed softening the economic blows experienced in 2003. The events which have been making the headlines this year have very significantly penalized the 4* French hotel industry, which saw its RevPAR plummet by 12.7% over 12 rolling months at the end of November 2003.

An end-of-year showing improvement

After seeing a highly agitated start to the year, and a mediocre summer season, European hoteliers may end the year on a drop in RevPAR situated around 3%. Budget hotels will have done well, by relying on ever-present domestic customers. On the midmarket and upmarket segments, multiple sales actions taken by hoteliers will have certainly resulted in their finishing the year with less pronounced drops in occupancy rates than the previous year. The light at the end of the tunnel is almost at hand, all the more so since economists forecast a recovery for 2004. Two large uncertainties remain however: the progression of the Euro against the Dollar, which may stall European growth, as well as increase the cost of Europe as a destination for customers of the dollar zone; and the international geopolitical situation, for which the improvement is an absolute necessity to the outright recovery of the European hotel industry.


This report is based on a sample of 6,000 corporate-run chain hotels in Europe, representing 600,000 rooms. The data, gathered monthly and from each hotel, are redressed according to the categorical division of the corporate chain supply and by the weight of each country in the European Union. These results are from data that has been supplied by the chain hotels in France and Europe, for which MKG Consulting is the official statistics supplier.

Theodore Koumelis
Co-Founder & Managing Director - Travel Media Applications | Website

Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.