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European Chain Hotels Market Review - May 2010
European Cup Finals drive profitability in Hamburg and Madrid
Hotel profits in Hamburg and Madrid soared in May thanks to the cities hosting two separate soccer cup finals, according to the latest HotStats survey from TRI Hospitality Consulting.
In Hamburg, the location for the first ever Europa cup final, Revenue per Available Room (RevPAR) levels in the city grew by 11.7% to €93.15 despite an overall decline in room occupancy of 3.4 percentage points. Causing the rise in RevPAR was a 16.9% increase in achieved average room rate, equivalent to a year-on-year growth of €18.04.
The Europa Cup, contested between Fulham and Atletico Madrid, drew a crowd of 49,000 to the HSH Nordbank Arena in Hamburg boosting the rate achieved in the non-discounted rack rate market segment by 33.6% to €145.46 in May, as hoteliers seized the opportunity presented by extremely high demand levels. As a result, achieved average room rate for the month was approximately 14% above the rolling 12 month average at €124.98.
Equally impressive was the performance of the Madrid hotel market. Hotels in the Spanish capital, which hosted the Champions League Final, were better positioned to take advantage of the demand from German and Italian visitors taking extended weekend breaks as the match was scheduled on a Saturday night. With a crowd of more than 73,000 supporting Bayern Munich and Inter Milan on the night, room occupancy levels in the city were 10.6 percentage points higher than during the same period in 2009. In addition, average room rate levels in the city grew by 13.1% to €145.44 resulting in an overall RevPAR increase of 31%.
Due to the significant increase in rooms revenue, payroll levels were far improved in Hamburg, by 4.0 percentage points to 28.6% of total revenue; and Madrid, by 6.6 percentage points to 32.3% of total revenue. The strong headline performance levels alongside significant cost savings resulted in an increase in Gross Operating Profit per Available Room (GOPPAR) of 33.4% in Hamburg and 62.8% in Madrid.
"We have highlighted the impact of major events on hotel performance in the past, but such events are even more important at the moment, if only to distract hoteliers from the wider issues in the market. Looking at the year to date figures for 2010, both Hamburg and Madrid are now showing a positive set of results with growth in profitability firmly back on the agenda" commented Jonathan Langston, managing director, TRI Hospitality Consulting.
Fall out from 2009 forcing a rate war in the East
Increases in hotel supply and depreciating market conditions forced hotels in Prague and Budapest to engage in further price reductions in May in order to drive room occupancy, according to the latest HotStats survey.
This strategy has been successful in Budapest where room occupancy has grown by 11.7 percentage points to 72.7% but only at the expense of average room rate, which declined a further 13.4% last month following a 10.2% decline in May 2009. That said, as a result of these measures, RevPAR in the Budapest hotel market increased by 3.1% to €68.36.
In contrast, whilst it appears that a similar strategy has been adopted in Prague, it has not been executed with the same level of success. Although a 14.7% sacrifice in room rate resulted in an 8.5 percentage point increase in room occupancy to 78.4%, it was not enough to grow yield and the city ended the month with a year-on-year RevPAR decline of 4.3% to €72.82.
London performs well but Rome and Paris are better
Not surprisingly, following an achieved average room occupancy of 85.7% in May 2009, London hoteliers were unable to increase the volume of accommodated roomnights in the same month in 2010 and room occupancy remained stable at 85.5%. That said, average room rate in London grew by an impressive 7.8% to €164.74 and as a result, RevPAR grew by 7.6% to €140.83.
However, with the inclusion of the premium-rated Rome and the strong performance of Paris during the French Open, London has been pushed down to third place in the latest HotStats survey.
There were nine days of play in the French Open in May and as a result RevPAR in the city was 16.3 % above the rolling 12 month average at €159.72. Despite a decline in both room occupancy and average room rate, RevPAR in the Italian capital remained at €178.28, more than 20% above London.
The hotels profiled in this report are drawn from the HotStats database and reflect the portfolios and distribution of the hotel chains that we survey and which operate primarily in the four and five-star sectors.
Please note: The data samples are reviewed and rebased each year to reflect the changes in the HotStats survey base. As a result, performance ratios published last year may differ from those contained within this report.
TRI Hospitality Consulting provides a wide range of services to clients in the hotel sector.
For more information contact:
Jonathan Langston, managing director
Charles Scudamore, director
David Bailey, deputy managing director
Ben Livingstone, senior consultant
For an inside view of a local or regional market place in the hotel sector, bespoke HotStats reports are available. Terms and conditions apply. To view a sample report visit: http://www.trihc.com/Home.aspx?pID=149-0 Or from the TRI home page select Market knowledge and follow the path to Market reports.
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