European hotel industry fully booked

Where will the hotel industry see the most growth over the next few years? As one of the biggest conferences in the sector kicks off, a report from PwC sounds an optimistic note

This week, over 1,900 hotel industry leaders and investors will descend on Berlin for the start of the International Hotel Investment Forum.

The start of the forum is accompanied by good news for the European hotel industry as PwC launches its European cities hotel forecast.

The report, which covers anticipated growth in revPAR (revenue per room) and occupancy rates, takes 18 European cities into account. It presents an almost overwhelmingly positive picture of rejuvenated trading across almost all cities examined, providing major opportunities for the hotel industry to capitalise on growth in their region.

Major growth areas

Growth is anticipated across 17 of the 18 cities examined, with London and Paris offering particularly encouraging prospects in revPAR and occupancy rates in the 2014 and 2015 period.

With a predicted 2014 growth of 5.2%, Dublin has emerged as the leading area of increase in revPAR. Followed by a growth of 3.8% for both London and Paris. According to the report, the picture for the 2015 period is equally encouraging. London emerges as the leader in prospective growth in revPAR, with an increase of 5.2%, while Dublin is anticipated to experience a further 3.8% growth.

Lisbon, an increasingly popular tourist destination, has emerged as another major potential growth area in 2015, with a prospective growth in revPAR of 3.4%.

While the forecast paints a picture of growth across Europe in general, Madrid is the only exception, with no growth predicted for 2014 or 2015. However, PwC does point to a slowing rate of decline in the Spanish capital.

Growth drivers

PwC cites an improving economic backdrop and an increase in European travel and tourism as the main reason behind the prospective growth. Both consumer and business travel will have a positive impact on the European hotel sector, says Robert Milburn, head of hotels at PwC and a chartered accountant.

“Travel prospects in Europe are brighter, with consumers prioritising their main holiday above a wide range of other goods and services.  Business travel is expected to influence hotel trading in Germany, UK and France.”

Milburn also anticipates that instability in northern Africa could encourage more tourists to choose southern European holiday destinations.

Occupancy Levels

The report paints a similarly positive picture for occupancy levels across Europe. London, Paris and Edinburgh are expected to see healthy occupancy rates of over 80% in 2014, with these high numbers continuing into 2015.

Liz Hall, head of hospitality and leisure research at PwC anticipates that occupancy rates in London will continue to stay high in 2014 and 2015, with more growth expected in rates.

She says, “Occupancy is expected to stay high and rates to see more growth. There will be stimulus to business and leisure prospects as GDP recovery strengthens. There are plenty of events to draw in visitors, including the Farnborough International Airshow in July, and a relaxation of Chinese visa rules will also be positive.”

Data provided by STRGlobal shows that there are currently over 61,000 rooms being constructed across Europe, with the construction of rooms in areas such as Russia, UK, Turkey and Germany accounting for around 60% of this figure.

The future

The changing role of digital technology is identified as a ‘megatrend’, challenging the hotel industry to ensure that their capability can matched the increasing technological demands of the consumer. The ability to access mobile information and booking services easily, safely and in real time is now expected by consumers and business customers alike.

And growth is by no means limited to Europe. The announcement of the UAE’s successful bid to host the 2020 World Expo in December last year means 45,000 – 60,000 new hotel rooms will be constructed in the area surrounding the exhibition centre site in the next six years.

Robert Milburn concludes, “Some trends, like the mobile and digital revolution, are taking hotels to a whole new world as they battle to stay relevant to consumers. The challenge for hotels is to capitalise on the improved environment as well as the new opportunities a changing world offers.”

Ellie Clayton

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