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American Express: Despite a struggle to fill rooms, hotel rates in Western Europe remain stable

Hotel rates in Western Europe displayed stability over Q4, with average Lower and Mid Range hotel rates sliding 0.3% and Upper Range rates…

Hotel rates in Western Europe displayed stability over Q4, with average Lower and Mid Range hotel rates sliding 0.3% and Upper Range rates increasing 0.6%, according to a study of American Express<.>.



At country level, hotel rates posted only modest changes. Mid Range hotel rates – a popular category of accommodation, as business travel budgets are cut – showed limited movement. Hotel rates in France, Italy and the Netherlands decreased by 3.1%, 0.6% and 3.7%, while in UK, German and Spain rates rose 0.7%, 1.0% and 0.2% respectively.



The modest Mid Range movements in Q4 have helped the European hotel industry defy market conditions, suggesting the European lodging industry has turned the corner. Leading the annual Mid Range hotel rate increases are the Netherlands, Spain and the UK, up 12.6%, 11.4% and 6.5% respectively.



At city level, Q4 average Mid Range rates in Amsterdam, Madrid and London were 175 euro, 107 euro and 198 euro.



Global Outlook



Conversely, global figures confirm an industry harder hit by the economic slowdown, with quarter-on-quarter reductions of between 0.3% and 9.0% in the Mid Range accommodation category. At city level, Mid Range rates in Los Angeles were down quarter-on-quarter from 174 euro to 163 euro and in New York from 216 euro to 203 euro. By contrast, London Mid Range rates increased quarter-on-quarter, up from 194 euro to 198 euro, suggesting a more buoyant market in Europe's key 'gateway' city.



Loraine O'Keefe, Manager Consulting Services Group, American Express, says: "Although hotels in major European cities have reported occupancy levels at their lowest since the Gulf War, European hotel rates are beginning to stabilise, rather than fall. This suggests that European hotels are weathering the storm more successfully than those in the US."



Commenting on the year ahead, O'Keefe adds: "European Mid Range and 'no frills' accommodation seem to be nearing the end of the downturn. After sharp declines that began before September 11, hotel occupancy rates are starting to show signs of stabilising. However, the Upper Range bracket is in for a longer road to recovery. Not only have they suffered from a drop in high- spending US business traffic, but also more competition from the Mid Range offerings that provide good business facilities at a lower rate. We will see a rebound in the Mid and Lower Range in 2002, but Upper Range hotels will have more of a fight back until 2003."



Staying Power: Hotels' response



Smart marketing and sophisticated yield management strategies have pulled hotels back from the brink. Hotels have used special promotions to fill rooms such as "two-for-one" and advance purchase discounts available to travellers. Promotions are likely to continue into 2002 to help rebuild confidence and encourage travel.



O'Keefe also points to intelligent management, rather than knee jerk reaction as a factor in recovery. "During the Gulf War we saw a lot of 'panic management' on the part of hotel chains. This time, yield management techniques have allowed hotels to respond swiftly, without irrational pricing."



'No frills' steal a march



"The recessionary climate may lead to a longer term review of the way companies buy hotel accommodation," says O'Keefe. "As the airline industry undertakes a strategic review, so too are hotels rethinking their offer. Budget hotels are capturing market share as travel budgets are scrutinised. The 'no frills' offer has become attractive for budget-minded travellers, especially as the service and facilities available have improved."



O'Keefe says: "Savvy corporates are using the downturn to review their corporate deals and renegotiate rates. American Express notes greater emphasis on deal benchmarking and stricter levels of travel policy enforcement."



Leisure market



Tourism has fallen in the aftermath of the September 11 terrorist attacks. In the UK, the Queen's Jubilee is expected to be a big draw for Asian and US holidaymakers and will help to boost the leisure sector, recovering ground lost in 2001. In addition, the trend towards weekend mini-breaks, over package deals, may help revitalise the sector.

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.

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