With Brexit looming, Europe's hotels see room rates rise

Riu will rebrand and renovate the Edificio España into a 24-floor Riu Plaza hotel with three floors of retail space.
Photo of Madrid: Tim Adams / CC BY 2.0

Despite the predictions of a decline in travel across Europe from the UK following the Brexit referendum, data collected by OTA Insight is decidedly more positive. Rates in Europe’s holiday cities rose over the summer, and hoteliers did not register any pressure on outbound UK travelers as a result of the falling pound.

In fact, OTA Insight reported that seven out of eight leading holiday cities had seen significant increases in hotel rates since the UK voted to leave the European Union last year.

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Athens saw the most significant increase in room rates, at 20 percent, followed by Lisbon at 16 percent. Copenhagen reported continued growth in tourism and bed nights coupled with an increase in rates on 14 percent. Madrid came fourth at 8 percent, closely followed by Dubrovnik at 7 percent and Madrid and Paris at 3 percent. Nice was the only city that saw a decline in rates, of 1 percent.

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“There has been a significant increase in hotel rates across Europe at a time when many would expect hoteliers to reduce prices in an effort to Brexit-proof their revenues,” Adriaan Coppens, CEO & founder, OTA Insight, said. “It is encouraging to see that there are still high and increasing visitor numbers of destinations across the continent and in turn hoteliers have the confidence to respond to this continued level of demand with an increase in rates. Hotel rates will inevitably decline in some destinations but overall the outlook for revenues is positive.”

In addition to the increase in hotel rates, Coppens told HOTEL MANAGEMENT, key European cities have shown strong performance when it comes to tourist arrival data. “European travel is still thriving and we’re not seeing any real major immediate aftereffects from Brexit. Spain was one of the countries where detrimental effects were most expected and in fact, it has been reported that the overnight international tourist arrivals in Spain for May this year was up almost 12 percent on the same month last year.”

The period following the EU Referendum saw outbound travel from the UK remain strong, but this is now faltering. According to the ONS, UK residents made 6.9 million visits abroad in July 2017, a decline of 2 percent of the year, spending £4.5 billion, also a fall of 2 percent.

Looking more widely, the ONS said that from May to July 2017 there were 1 percent fewer visits abroad by UK residents compared with the corresponding period a year earlier, and they spent 2 percent more on these visits. Split by area of visit, the largest increase was visits to “Other EU” (countries that joined the EU from January 1, 2004 onwards), which rose 12 percent. When looking at reason for visit, holiday visits fell by 3 percent and visits to friends and relatives increased by 11 percent from the same period the previous year. Business visits decreased by 2 percent.

“We are able to get the prices from customers no matter what, and that shows resilience, and that shows that customers want to go on vacation,” TUI CEO Friedrich Joussen told analysts regarding UK demand. Still, he said, “if you increase prices by 15 percent…then people start to trade down or they go to Bulgaria or they go to other places where potentially the prices are a little bit lower.”

August saw the pound reach its lowest point since the vote, at an eight-year low, buying just over €1, and $1.28.

Andrew Sentance, senior economic advisor, PwC, told attendees at the launch of the company’s UK forecast for 2018 that he did not expect to see any significant movement in the value of the pound for the foreseeable future. Speculation over a possible interest rate rise lifted it from the summer’s lows, but it is still expected to stick at around $1.3.

Brexit was widely expected to drive an increase in staycations in the UK, something that appeared to have been borne out when the government reported that traffic levels across the UK hit new records in the year to end-June. Total UK car mileage over the year was up 1.3 percent. Langton Capital analyst Mark Brumby commenting that: “The move towards staycations after the fall of Sterling may have helped to boost the numbers”.

While the UK wobbles, TUI reported that destinations such as Spain were “full,” indicating that mainland Europe did not need the UK to get by. The sentiment was felt increasingly across Europe, with French president Emmanuel Macron due to give a speech outlining greater union, supported by the newly reelected German chancellor, Angela Merkel. With GDP growth in the eurozone outstripping that of the UK, hotels in the region’s holiday destinations need not fear having empty deckchairs.

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.

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