Europe's hotels achieve record level performance

Novotel London Tower Bridge, UK. Photo credit: AccorHotels

Europe’s hotel industry recorded all-time high performance in 2017, and STR predicts the region will achieve additional growth in 2018. 

“Hotel markets across Europe have benefitted from a wide range of factors in recent years,” Robin Rossmann, MD of STR, said in a statement. “While hotel performance was up for nearly every world region in 2017, Europe was the clear leader in terms of growth. The region has seen substantial growth in both tourism and corporate business, and has remained resilient in the face of several terror attacks, with increasingly shorter turnaround periods needed for performance recovery. Looking ahead, we expect 2018 to be another stellar year for Europe hotels, with RevPAR growth again exceeding 5 percent year over year.”

Occupancy in the region not only grew 2.4 percent to 71.9 percent in 2017, but also reached close to 10 percent higher than the previous record in 2008 just before the global financial crisis. Limited supply growth in most European markets and steady demand growth helped boost occupancy and room rates, Rossmann said. Europe’s hotels recorded double-digit ADR growth from July to September 2017, compared with the same period in 2008, allowing ADR to grow 31 percent to €110.51 for the year. In response, RevPAR grew 5.6 percent to €79.46.

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Europe's achieved occupancy topped the record reached in 2008. Photo credit: STR

Several key European cities recorded increases in high compression nights between 2008 and 2017, achieving more nights with occupancy levels reaching more than 90 percent. These uplifts allowed operators to increase rates as the remaining rooms available become more valuable and bump up rate premiums on these nights. 

London’s hotels, for example, reported approximately 75 nights with occupancy above 90 percent in both 2008 and 2017. However, the market’s ADR premium increased from 22 percent in 2008 to 33 percent in 2017. Dublin also reported a significant rise in high compression nights, which increased from the 14 in 2008 to 145 in 2017, and in its ADR premium, which increased from 25 percent in 2008 to 41 percent in 2017.

Steady occupancy growth has helped to boost ADR in Europe since 2008. Photo credit: STR

What's Ahead

STR predicts a number of key European cities will experience strong performance growth, especially Moscow, Athens, Paris Brussels, Amsterdam, Madrid and Prague, who are expected to see RevPAR grow more than 6 percent due to ADR growth. Demand for travel to Paris—even after the terror attacks in recent months—is expected to drive performance in the city. Meanwhile, Berlin’s hotels are expected to record a 5-percent RevPAR increase due to ADR growth.

London’s hotel market has not fared as well as other key markets. The city’s performance slowed in recent months as the weakened pound rebounded against the dollar post-Brexit. Although London’s demand is expected to continue growing, STR predicts supply growth will outweigh the growing number of room nights sold. ADR growth is expected to help the capital city achieve close to 2-percent year-end growth in RevPAR.

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