According to the numbers, it’s a good time to be a hotelier in Europe, even though hotels across the pond are starting to encounter the same supply challenges found in gateway markets in the U.S. At this year’s International Hotel Investment Forum, being held this week at the InterContinental Berlin, Robin Rossmann, managing director at STR, showcased a number of figures that outlined the strengths and weaknesses inherent in the world’s largest hospitality markets during a panel titled "Past, Present and Future: A Global Hotel Market Overview." Here are four major takeaways from his presentation.
1. Europe Stands Tall
During 2018, European hotels managed to sustain revenue-per-available-room growth of 5 percent or more, and some markets, such as London, managed to find strength after several months of challenges. According to Rossmann, London struggled with negative occupancies from spring 2017 to spring 2018, which finally were flipped due to a strong performance this past summer.
“We saw not only good weather but strong demand from the Middle East and an earlier Ramadan. It was a fabulous year for London,” Rossmann said.
Other standout European markets include Edinburgh, Scotland, and Dublin, which both have been host to RevPAR growth of more than 50 percent during the past decade due to booming demand and limited supply growth. Rossmann said supply is expected to increase greatly over the next few years, but advance bookings for the 6 Nations rugby tournament and numerous TED Talks are helping the markets remain flat in RevPAR.
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Rossman also pointed to Paris and Brussels as opportunity markets with room for growth, particularly in high-end demand. In fact, STR is forecasting suites to outperform guestrooms in both of these markets during 2019.
Meanwhile, increased supply has caused demand to falter in Germany, a market known for its stability and consistency. Supply growth in the country has increased from less than 1 percent a year on average to more than 2.5 percent a year, causing some concern for the future as more than 100,000 rooms currently fill its pipeline.
2. Brands Gain Favor
During his presentation, Rossmann mused on the position brands occupy in the hotel industry’s subconscious. “There hasn’t been a conference I’ve been to in the last decade where there hasn’t been brand bashing,” he said. “However, for whatever complaints there may be about brands, the reality is owners are choosing more branded hotels over independent hotels.”
In the U.S., this is plain to see. Two-thirds of the U.S. hotel industry consists of branded properties. Ten years ago, the reverse would have been true internationally, but Rossmann said this is gradually shifting.
“In the wise words of Yoda: Grow, you must, or acquired by Accor you will be,” Rossmann said.
3. Hostels Claim London
As Rossmann stated in his opening, London had a surprisingly strong year, but he also said traditional hotels in the city may be losing market share to hostels over price.
While hostels are common in Europe, hotels still account for about 55 percent of all accommodation options in London. This, Rossmann said, may change, with London hostels commanding occupancy levels similar to those of the city’s hotels.
For the record, the average daily rate for a hotel in London is £150 a night, while hostels come in at £20.
“Even though there is uncertainty, even though leisure may be hit, I think hostels may outperform hotels in London in 2019,” Rossmann said.
4. Russia Could Stumble
The biggest travel event of 2018 was the FIFA World Cup, which saw more than 5 million tourists visit host cities in Russia that summer. According to Rossmann, the turnout exceeded expectations, which means the following year will pale in comparison.
“In 2019, it is unavoidable there will be a hangover in terms of performance,” he said. “Moscow was up 60 percent overall in 2018. Even though Russia will still perform well in 2019, it will be nowhere near as good as it was last year.”