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HotStats European Chain Hotels Market Review - October 2012: Focus on the German Hotel Market
Is Hamburg really the most attractive hotel market for investment in Germany?
As headline revenue levels in Hamburg are equal to, and exceed, some of the major hotel markets in Germany and the city is identified by Wüst & Partner and Ottenströer as the most attractive hotel market for investment in Germany, the latest HotStats survey by TRI Hospitality Consulting reveals that profit levels in the city remain well below other German markets, including Berlin, Dusseldorf, Munich and Cologne.
As a result of a 1.1% drop in food and beverage revenue per available room and a 1.1% decline in Revenue per Available Room (RevPAR), Total Revenue per Available Room (TrevPAR) at hotels in Hamburg dropped by 0.5% in the ten months to October 2012, but remains strong at €149.37.
Furthermore, year-to-date TrevPAR levels at hotels in Hamburg remain above those achieved in Germany's other major hotel markets, including Berlin (€126.20), Munich (€135.66) and Frankfurt (€126.74).
However, the impact of payroll levels on the overall profitability of the hotel market is evident. When assessed as a proportion of total revenue, at 35.7%, payroll levels in Hamburg are well above comparable German city markets, such as Cologne (30.6%) and Dusseldorf (31.2%), but remain below other major cities in Europe, such as Vienna, which has crept up to 38.6% of total revenue following a year-on-year increase of 1.5 percentage points.
In terms of scale, Hamburg is the third largest hotel market in Germany, offering 43,700 beds, compared to 92,000 in Berlin and 51,700 in Munich. The market witnessed the addition of 1,140 new rooms between January 2011 and March 2012, which appear to have been absorbed, with a further 3,773 new rooms expected up to 2014, with most new hotel developments taking place in the HafenCity district.
Hamburg is highlighted as the most attractive German hotel market for investors, ahead of Dresden, Rostock, Cologne and Berlin, yet the city will be amongst those in Germany which will achieve a decline in profit per room in 2012. Furthermore, the year-to-date profit conversion of 32.2% of total revenue leaves Hamburg hoteliers well below other German cities.
Of the other cities identified below Hamburg as ripe for investment, Berlin achieved a year-to-date profit conversion of 38.5%, with Cologne at 33.4%. And markets which did not even make the top ten, such as Munich and Dusseldorf, achieved year-to-date profit conversion levels of 39.2% and 35.1%, respectively.
2012 proving to be a tough year for hotels in Germany's congress markets
Performance levels at hotels in a number of Germany's major city markets greatly benefit from significant increases in demand driven by some of the largest congress facilities in the world, yet for every upside there is usually a downside and 2012 is proving to be a tough year of operation, according to the latest HotStats survey.
Frankfurt is the second biggest congress centre in the world, hosting some 31 fairs in 2011 and attracting over two million visitors. However, after a strong period of operation in 2011, when hotels in the city achieved a 7.2% increase in profit per room as a 4.8% increase in RevPAR was achieved in the city, 2012 is a different story.
In addition to having fewer fairs in 2012, market performance in the city has been negatively impacted by a significant increase in hotel stock ahead of the opening of the third runway at the airport, which has included 583 bedrooms from Hilton Worldwide, the 168-bedroom Meininger Hotel Frankfurt Airport, 148-bedroom Dormero Hotel, 109-bedroom B&B Hotel and the 149-bedroom Fleming's Hotel Frankfurt Main.
As a result, year-to-date profit per room at hotels in Frankfurt has declined by 1.9% to €42.50 per available room. The decline is despite a slight increase in total revenue levels and may be, in part, attributed to the increase in costs in the rooms department as a drought in major demand generating events has encouraged hoteliers to ‘buy in business'. This cost is illustrated in the 10.7 per cent increase in the amounts paid in Travel Agents' Commissions, to €4.97 from €4.49 per room let and is now equivalent to 3.8% of rooms revenue.
In October, hotels in Dusseldorf suffered a 15.4% year-on-year decline in profit levels as the 27,000 strong EXPOPHARM congress moved to Munich, contributing to a year-to-date drop in Gross Operating Profit per Available Room (GOPPAR) of 3.2% to €38.01. The strong performance in 2011 as a result of the Eurovision Song Contest in May and the triennial Euroshop and Interpack fairs seems like a thing of the past.
In contrast, hoteliers in Munich, which is not typically recognised as a congress-specific city, welcomed the event, which fuelled a 17.4% increase in achieved average room rate, contributing to a 16.7% increase in RevPAR and a 16.1% increase in profit per room.
The swing from feast to famine is no better exemplified than in Cologne this month, as the absence of the ‘Anuga' fair in October 2012 was enough to send profit levels in the city plummeting by 44.7%.
The decline in profit was as a result of a 26.3% decline in achieved average room rate, which was primarily as a result of a 53% drop in the rate achieved in the Best Available Rate segment, which is closely linked to peak demand periods, to €142.37 from €302.91 during the same period in 2011.
The MENA Chain Hotels sample is composed of 84 hotels with an average hotel size of 330 bedrooms.
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. It has offices in London, Dubai and Barcelona.
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©TRI Hospitality Consulting 2011
Unless otherwise attributed, all material in this press release is the copyright of TRI Hospitality Consulting.
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