Europe's 2018 hotel strengths belie economic fears: HotStats

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Economists expect the eurozone economy to continue slowing this year. Photo credit: Pixabay / moritz320

HotStats has released its European Annual Hotel Performance Tracker 2019, examining data for the region as well as spotlighting London, Paris, Barcelona, Moscow and Dublin. 

According to the report, Europe's hotels as a whole performed positively in 2018, in both top- and bottom-line measures. Full-service hotels grew their room profits by 5.8 percent year over year, bolstered by gains in all revenue centers, which led to a 3.8 percent increase in total revenue per available room (TRevPAR) to €172.29 year over year. 

“Despite challenges, hoteliers drove healthy top-line numbers. That, coupled with deftly sidestepping some expense hurdles, equated into strong profitability for the year,” said HotStats CEO Pablo Alonso. “In order to continue the momentum, hoteliers will need to remain cost conscious and revenue focused in order to maximize flow-through.” 

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Economic Concerns

The positivity in Europe’s hotel industry last year belies a regional economy that is in regression, according to HotStats. The report cites Italy’s "fall into recession" as the country’s economy contracted by 0.2 percent in the fourth quarter, while Germany—Europe’s biggest economy—is expected to narrowly avoid recession. 

Overall, data show the eurozone economy grew at its weakest pace in four years, with further challenges in 2019 putting Europe "on tilt." 

Still, 2018 was a strong year for Europe’s hotels, with top-line numbers helping to drive profits. Revenue per available room (RevPAR) grew 5 percent year over year, fueled by a 4.2 percent increase in average room rate, which reached €151.82 for the year. On the flip side, occupancy growth was only 0.6 percentage points, leading to an overall annual occupancy rate of 75.3 percent. 

Profit margins rose 0.6 percentage points to 37.1 percent of total revenue. Profit-margin growth in 2018, however, was less than in 2017, when margins grew by 0.7 percentage points off 6.7 percent year-over-year growth in gross operating profit per available room (GOPPAR), which also was higher than 2018’s figure, the report noted.

HotStats suggests this year could be a shaky one for hotel owners and operators if economic indicators are trusted. Eurostat, which provides statistical data on the European Union, reported GDP growth of the 19 countries in the eurozone that use the euro was 1.8 percent in 2018, down from 2.4 percent in 2017.

Brexit Fears

The report indicated economists expect the eurozone economy to slow even more in 2019, and the U.K.’s imminent departure from the EU could make things even more tricky, particularly if a new trade agreement isn’t put in place ahead of time.

U.K. businesses are "in limbo," the report suggests, while they wait to see what will happen when (and if) the country formally exits the EU. 

Brexit, however, could prove beneficial to other hotel markets throughout the region as demand patterns change, the report noted, reasoning if EU citizens can't effortlessly come to London, they'll go elsewhere within the EU for their trips.

And those visits may not all come from the continent. As noted earlier this month, U.K. departures to mainland Europe are set to grow at a compound annual growth rate (CAGR) of 2.88 percent from 55.9 million in 2018 to 64.4 million in 2023, according to GlobalData’s latest report, Tourism Source Market Insight: United Kingdom. In particular, Spain and Eastern Europe are poised to see continued growth.

recent survey from STR's Consumer Travel Insights team found the looming Brexit has had little impact on 2019 travel plans, but it has shaped a negative perception of the U.K. among European travelers, posing a potential problem for hoteliers in top destinations across the country. Overall, 9 percent of U.K. travelers surveyed said they were less likely to go to Europe in 2019 due to Brexit, while 10 percent of Europeans said they are less likely to go to the U.K.

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