European chain hoteliers reported falls in profit, revenue and occupancy across most key cities during 2008, according to the full-year HotStats survey by TRI Hospitality Consulting. Seven out of the ten cities surveyed reported decreases in income before fixed charges (IBFC), also known as gross operating profit.
"Most European hotel markets enjoyed profit growth for the first 8 months of the year, but the rapid downturn in trading since August has affected the full-year data. Although 9 out of 10 cities maintained average room rate growth over the year, falling demand and rising costs meant that only three achieved increased profits," said David Bailey, deputy managing director, TRI Hospitality Consulting.
Profit up in Berlin, Budapest and Hamburg
Berlin, Budapest and Hamburg reported increases in profit for the full year. In Berlin, a sample of full-service branded hotels reported daily IBFC up by 1.9 per cent to €56.40 per available room per day, making German's capital the fourth most profitable city in the survey.
Budapest's profit increased by 5.4 per cent, albeit from a very low base the previous year; in Hamburg, the only city to report an annual occupancy increase, daily IBFC was up 2.4 per cent to €44.29 per available room.
"These cities were not overly exposed to the banking crisis and their hotels did not enjoy such a trading boom during 2007 compared to other cities, hence the profit increases on the back of relatively modest performances," said Bailey.
In December alone, Hamburg enjoyed a 13.4 per cent upswing in revpar to €74.00 largely fuelled by a nursing congress and stronger domestic group demand stimulated by the city's popular Christmas markets and musicals. Average occupancy increased 7.1 percentage points to 66.9 per cent.
Profit falls furthest in Prague
Prague reported the greatest fall in profitability with IBFC down by 29.7 per cent to a daily figure of €49.91 per available room.
"Prague's hoteliers experienced lower demand for business meetings and conferences throughout the year. In October and November demand was further affected by the banking crisis. By December, when profit per available room halved, many companies were cancelling their year-end meetings," said Bailey.
Historically, Greeks enjoy the Czech Christmas experience, making them a significant source market in December. But with political unrest and riots keeping them at home, one Prague hotelier said there were fewer Greek guests. In December alone, Prague's average occupancy fell by 15.2 percentage points to 58 per cent. For the full year the drop was of 4.6 percentage points to 70.6 per cent.
In absolute terms London had the highest average occupancy of 82.2 per cent for the full year while Paris recorded the highest average room rate at €218.03.
The massive room rate boost provided by hosting the UEFA EURO football championships fed into Vienna's full-year results. The 6.3 per cent annual rise to €163.32 put the Austrian capital in third place after Amsterdam in second place with an average room rate of €171.36.
London was the most profitable hotel market in the survey with daily IBFC of €90.60 per available room. Paris was not far behind with each available bedroom generating €90.15 of profit per day.
"The 2008 full-year European data was generally characterised by falls in average occupancy, while average room rate continued to grow. The ability to repeat this performance in 2009 would be nothing short of miraculous. Yet accepting some fall in demand as a fact of life while protecting room rates as much as possible will be the most successful damage limitation strategy for hoteliers," said Bailey.