The repercussions of the events of September 11th, and of the economic slowdown weigh down upon the hotel sector, whose results…
The repercussions of the events of September 11th, and of the economic slowdown weigh down upon the hotel sector, whose results from the first semester of 2002 are lower than those of the first half of 2001 according to a survey of MKG Consulting. The Northern European countries in particular underwent an economic slowdown. Business tourism has also felt the side effects of the current gloomy economy, while the sector as a whole has seen a less significant flow in the number of international travellers than last year. Only the budget and economy segments, less oriented towards this type of clientele, are doing well, thanks to the increase of the average room rate.
- France ahead of other European countries
- French RevPAR: -3.2% in 2001
- European RevPAR: -5.1% in the first semester of 2001
- Benelux and the United Kingdom in marked decline
- The reduction of the average room rate does not succeed in curbing the falling occupation rate
- Budget and Economy segments have the best results
- An undeniable rise in RevPAR for 0* / 1* / 2* hotels
Methodology: This study is based on a sample of 4,100 corporate operated hotel chains in Europe, representing 450,000 rooms. The data, gathered monthly from each hotel, is redressed according to the segmentation of the corporate operated hotel chain supply, and by the weight of each country in the European Union.
These results come from figures supplied by the hotel chains located in France and throughout Europe, of which
1. European Union Zone: this year started with difficulty for chain hotels, with results from the first semester of 2002 being lower than those of the first half of 2001
Even though the month of April was strong, the results from European hotels in May and June once more lag behind last year’s results. As a whole, by the end of July 2002, the European hotel industry has seen its RevPAR drop by an average of 5.1% with regard to the same period in 2001. Though the average room rates have practically regained the previous level of last year (only -0.9%), the occupation rates, still in retreat (-2.9 points), explain this semester’s recorded drop in RevPAR. The fall in occupation rates affects all segments. This downfall is nonetheless more pronounced in the midmarket and upmarket segments (-3.5 points in the 3*, and -4.1 points in the 4*), whose clientele is more oriented towards international guests than those of the budget and economic hotels. The average room rates continue to progress at a steady rhythm in the budget and economy segments (+5.5% in 0* and 1*, +3.8% in 2*) and in the midmarket segment (+2.1% in 3*). The average daily rate for upmarket hotels shows a 3.1% deficit by the end of June. Finally, even though the budget and economy hotel market continues to register a rise in RevPAR, the 3* and above all the 4* hotels witness a diminishing of their revenue per available room in relation to the first semester of September 2001: -3.1% for the 3* segment and an average of -8.9% for the upmarket properties.
2. In Benelux and in Great Britain, the reduction of the average room rate does not succeed in stimulating activity
These very competitive markets have registered the strongest downturn in average room rates (-3.4% in Belgium, -5.0% in the Netherlands, and -6.9% in Great Britain). Although the fall in the occupation rate is less than that of the other European countries, Belgium, the Netherlands, and Great Britain are experiencing a drop of more than 5% in RevPAR. The combined problems of the domestic economic slowdown and the reduction of international travel, notably with the American clientele, explain this marked diminution. According to the World Tourism Organization, the number of foreign tourists arriving on British soil, for example, has been reduced by 7.4% in 2001 compared to 2000. Globally, the British hotel chains saw an average diminution of 8.5% in RevPAR during the course of the first semester of 2002. Among the other European countries, only Austria noticed the average room rates decline by 2.6% during that period, but managed to hold the fall in RevPAR at -3.9%.
3. Southern Europe opts for a rise in average daily rates
In the other European countries, and particularly in Southern Europe, a rise in the average room rates is registered. In all countries the reduction of the occupation rate, sometimes considerable, has oriented the RevPAR downward. France succeeded in maintaining the fall at -3.2%, which constitutes the best performance in the European zone. Admittedly, France has been less affected by the slowdown of the American economy, but one must take into consideration the important weight of the budget and economy segments (0*/1*/2*) in the national hotel supply (of which we remarked continue to demonstrate good results). The Southern European countries (Spain, Italy, Portugal), who have obtained the best activity results for 2001 and resisted best the consequences of 11 September, witnessed a deceptive start to the year. Today, the augmentation of the average room gives rise to questions, seeing that the occupation rates are clearly in retreat: -6.0 points in Portugal, -4.5 points in Spain, -4.4 points in Italy. Engaged in a cycle of price rising, these destinations are highly rivaled by other regions in the Mediterranean bassin such as Turkey, Morocco, and Tunisia. The last point worth mentioning for the semester, is the change in Germany’s RevPAR by -4.2%. As such, the German hotel industry limits the damage, even if its results hide strong geographical discrepancies and significant irregularity from month to month.
4. MKG Consulting maintains its prediction of a +2% to 4% growth in RevPAR for France, and a +2% to 5% for Europe
The year 2002 made its entry with lows, and marked by uncertainties for an industry that has in recent years grown accustomed to living with sustained growth. Economic relief for the European zone is still being anticipated during the second semester of 2002. Order books are being filled out again, and the confidence indices are higher, notably in Germany. Nevertheless, several question marks still remain. The American clientele is slow in making a comeback, all the more since the value of the Euro to the Dollar raises the cost of a stay in Europe. In addition, the overseas financial scandals and difficulties of some of the most prestigious enterprises in the United States risk delaying the economic recovery. This being said, the fundamentals of the sector are solid. The depression recorded during the first semester conforms perfectly to MKG Consulting’s predictions. Despite the results from the first semester, 2002 should end with the RevPAR on the rise, and thus the European hotel industry will resume the growth of the preceding years.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
