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Our research examines the relative performance of the
European hotel sector over the last 12 months and highlights
strategies that have been adopted to cope with 9/11 and the
deteriorating economic conditions. To mitigate the impact of
seasonality we have tracked the performance of a consistent sample of
hotels between January 1999 and September 2002 and analysed the data
on a rolling 12-month basis.
Our analysis looks at hotel performance data for both
the UK and continental Europe by segmenting the hotels that contribute
to our survey into four different categories – namely luxury,
first-class, mid-market and economy/budget. Since there is no
official grading system across Europe, Deloitte & Touche have applied
a classification to each brand in the survey, which broadly recognizes
the positioning of each of the brands.
Our research reveals, as illustrated in Chart A, that
on a rolling 12-basis the luxury, first-class and mid-market sectors
have all experienced significant occupancy declines post 9/11 across
continental Europe. In the case of first-class and mid-market hotels
this decline actually started at the beginning of 2001, in the main
caused by a slowdown in the world economy, which lead to curtailing of
travel budgets, although the events of 9/11 exacerbated the decline.
Prior to 9/11 luxury hotels managed to maintain occupancy levels but
in the wake of changing travel patterns post 9/11, as non-essential
travel plans were scaled back, this sector came under the most
pressure with occupancy levels falling rapidly from 70 percent to 62
percent.
By contrast, the budget sector has proved very
resilient with occupancy levels actually increasing, albeit marginally
(up one percent) to 63 percent. One reason for this is that budget
hotels are generally located in either suburban areas or on motorways,
and as consumers have preferred to stay closer to home and travel by
car or rail, these properties have been well located to attract this
extra demand.
Chart A –
Continental Europe rolling-12 occupancy analysis by grade of hotel
Source: HotelBenchmark Survey by Deloitte & Touche
Despite this fall in demand, all
sectors in continental Europe have managed to improve average room
rate when measured in euros between January 2000 and September 2002.
First-class, mid-market and budget hotels have all witnessed rate
growth of circa 12 percent, whilst the luxury sector, which trades at
a 100 percent premium to the market average has experienced a 31
percent increase in average room rates as demonstrated in Table 1.
Table 1 - %
change in KPI’s between January 2000 and Sept 2002 on a rolling
12-basis
|
|
Continental Europe |
United Kingdom |
|
|
Occupancy |
ADR |
RevPAR |
Occupancy |
ADR |
RevPAR |
|
Luxury |
-4.4 |
30.6 |
24.9 |
-15.3 |
-0.1 |
-15.4 |
|
First Class |
-8.1 |
12.0 |
2.9 |
-4.4 |
-1.8 |
-6.1 |
|
Mid-market |
-4.6 |
12.3 |
7.1 |
-4.6 |
2.0 |
-2.7 |
|
Budget |
0.7 |
12.0 |
12.8 |
4.7 |
2.5 |
7.3 |
|
Total |
-6.5 |
12.4 |
5.1 |
-4.1 |
-1.3 |
-5.4 |
Note: Continental Europe data in calculated in euros, UK data
calculated in UK£
Source: HotelBenchmark Survey by Deloitte & Touche
The resilience of the budget
sector is further demonstrated by the performance of the UK hotel
market where occupancy has moved ahead five percent between January
2000 and September 2002. This sector is the only market sector in the
UK to have exhibited an occupancy increase, and its performance
contrasts particularly with the luxury sector which has seen occupancy
levels plummet 15 percent from 77 percent to 63 percent (see Chart
B). Despite an overall fall in UK average room rates of 1.3 percent,
the budget sector rates have held up well with room rates improving by
2.5 percent over the same period.
Chart B – UK rolling 12 occupancy analysis by grade of
hotel
Source: HotelBenchmark Survey by Deloitte & Touche
One of the reasons that UK
hotels have experienced average room rate declines whilst their
continental neighbours have reported significant real average rate
growth has been due to the relative strength of the UK pound against
the euro.
Chart C – GBP-EUR Exchange rate
Source: The Bank of England
As a result, the UK has become
comparatively more expensive relative to other European destinations.
In addition, with the introduction of the euro in January 2002 this
has created further transparency in the marketplace, allowing
consumers to more readily identify the relative cost of a room in each
country. However, despite the falls in occupancy, UK hoteliers have
remained relatively robust in keeping price discounting to a minimum,
especially in the luxury sector where average room rates are just 0.1
percent below their January 2000 levels, despite the 15 percent fall
in occupancy.
Commenting on the findings,
Julia Felton, director travel, tourism and leisure at Deloitte &
Touche says: “The budget sector has proved the most resilient across
Europe during the recent tough trading conditions. These properties
have been well located to benefit from increased travel by road and
rail, as consumers have opted to engage in intra-regional travel
rather than fly to destinations further afield. Depressed economic
conditions have also encouraged business travellers to seek more
reasonably priced accommodation, and so we have witnessed a trading
down effect occurring across the spectrum of hotel types. What will
be interesting to observe is what proportion of these travellers trade
up once economic conditions improve in the future.”
The HotelBenchmark Survey
contains the largest independent source of
hotel performance data outside of North America and tracks the
performance of over 6,000 hotels every month. To complete this
analysis data for a consistent sample of hotels across Europe was
collated between January 1999 and September 2002. To mitigate the
impact of 9/11 data was computed on a moving 12 basis so that the real
underlying trend in performance could be analysed. For further
information please see
www.HotelBenchmark.com.
Deloitte & Touche
is the UK’s fastest growing major professional services
firm. It is based in 23 locations, has over 10,000 staff nationwide
and fee income of £713.6 million in 2001/2002. Deloitte & Touche is
the UK practice of Deloitte Touche Tohmatsu, a global leader in
professional services with over 98,000 people in 140 countries and fee
income of $12.5 billion for the year ended 31 May 2002.
The dedicated Travel, Tourism,
and Leisure practice serves owners, investors, operators and
developers throughout Europe, the Middle East, India and Africa.
Authorised by
the Financial Services Authority in respect of regulated activities.
The information contained in this article is correct at the time of
going to press. For further information on Deloitte & Touche, you can
access our website on
www.deloitte.co.uk. |
