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European Hotel Chains: New Downward
Slide in July, 2003
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September 17, 2003 - After an encouraging month of May and June, July marks a return to clearly retreating results. The RevPAR of corporate run chain hotels has fallen by 5.4%. While Germany seems to be continuing in its turnaround, the situation in the Netherlands is starting to worsen. With a fall in RevPAR by 5.5%, France recorded a rather deceiving month of July.

Monthly results for chain hotels in Europe – July 2003

Occ% 07/03
Chge (pts)
ARR 07/03
Chge (pts)
Revpar 07/03
Chge (pts)
0*
82,1%
2,4
30,3
3,6%
24,9
6,7%
1*
77,7%
-1,3
38,5
1,4%
29,9
-0,3%
2*
76,8%
-3,5
73,4
-0,9%
56,4
-5,2%
3*
60,1%
-0,5
78,0
-3,5%
46,9
-4,3%
4*
65,4%
-0,5
118,8
-5,0%
77,7
-5,8%
Total
64,3%
-0,9
93,0
-4,1%
59,8
-5,4%
Source: MKG Consulting Database – September 2003
.
Occ% 07/03
Chge (pts)
ARR 07/03
Chge (pts)
Revpar 07/03
Chge (pts)
Germany
57,9%
2,1
66,6
-5,1%
38,6
-1,5%
Italy
62,3%
-1,2
100,0
-3,6%
62,3
-5,4%
The Netherlands
64,9%
-6,3
85,5
-6,9%
55,4
-15,2%
United Kingdom
79,3%
-1,3
121,3
-3,4%
96,2
-4,9%
Spain
66,8%
0,5
81,5
-4,5%
54,4
-3,8%
France
70,7%
-5,2
69,3
1,5%
49,0
-5,5%
Source: MKG Consulting Database – September 2003

A 4.1% drop in average room rates in July 2003 

While occupancy rates were roughly equivalent during the month of July as compared to those observed last year (-0.9 points, from 65.2% in 2002 to 64.3% in 2003), the average daily rates were clearly oriented downwards (-4.1% to 93 euros). The reasons for these difficulties are known and have already largely been commented on: the war in Iraq, the SARS epidemic, the poor world economic situation. Without a doubt, reservations for the summer season were postponed, leading hoteliers to reconsider their sales policy. In addition, "unfortunate one-time events" have also complicated the job of hotelier, such as the freelance actors' strikes in France, the forest fires throughout the northern Mediterranean region, as well as the consequences of the Prestige oil spill along the Atlantic coast of Spain, France, and Portugal. However, this drop in average daily rates during the month of July has also come from political-economical sources. The absence of customers with a high buying power from North America and Japan, the less pronounced inclination this year of Germans to travel to their habitual summer destinations has led hoteliers to fill their hotels with more local clientele who spend less. Wherever the customers are present this year, they are paying much more attention to rates. Hoteliers must therefore practice a rate policy that is both aggressive and extremely fine. 

A 2.4% drop in RevPAR over 12 months 

Within such an environment, it is not surprising to observe that the upmarket categories continue to struggle harder that the budget categories. The 4* hotel industry recorded a 5.8% drop in the RevPAR, explained notably by a 5% drop in the average daily rates, while at the same time the occupancy rates remained practically unchanged (-0.5 points). Midmarket hotels did rather well, with a 4,3% drop in the RevPAR, while the 2* category posted a drop of 5.2%. The reduction of the difference between the average daily rates of the 2* and 3* hotels from one year to another (73 and 78 euros respectively in July 2003, versus 74 and 80 euros in July 2002) seems to have initiated movement of customers towards the midmarket hotels. These hotels saw their occupancy rates remain relatively stable around 60% (a fall of 0.5 points) while at the same time, the 2* segment was a fall of 3.5 points. These somewhat better results for the month of July 2003 in the 3* category, better than those of the other categories, are not confirmed by the longer-term trends. On 12 rolling months, the RevPAR of the midmarket segment posts on average the largest fall (-3.4%). The 3* hotel category is the only one to see a fall in the average daily rates (-1.6%). In all categories, the degradation of the results in July will have led to a RevPAR that fell by 2.4% over 12 rolling months, while at the same time the results from the month of June argue in favour of a more pronounced improvement. 

Encouraging results for Germany, mitigated for France

After a rather exceptional month of May in Germany, the results recorded for the month of July are once again encouraging for Germany. The country recorded among the best results of the month with a drop in RevPAR by 1.5%. It is the rise in the occupancy rate from one year to the next that guarantees this interesting evolution for the hoteliers, confronted by a strong reduction in the number of guests in their hotels since the month of May, while at the same time, seeing a downward trend in the average daily rates. This road to improvement should take a little more time in order to put the hotel industry on the right path in this country. The RevPAR at the end of July over 12 rolling months was still 4.8% below that of 12 rolling months at the end of July 2002, results that nevertheless taking into account the particularly depressing period at the end of 2001. France saw a rather deceiving month of July. A highly prized destination by international clientele, it seems to have been penalised by the lack of American and Japanese guests in particular. 

Whether it concerns comportment dictated by political considerations (France's stance with regards to the Iraq situation), or economic (drop in purchasing power, the increased cost of a stay in Europe due to the value of the Euro/Dollar), French hoteliers recorded a significant drop in the occupancy rates that month (-5.2 points versus last year). Nevertheless, they remain high with regards to the other European countries (70% versus 65% in average). In addition, French hoteliers seem to have resisted the temptation better than others to lower their rates, and thus limited the fall in RevPAR. In this way, over 12 rolling months, the results in France have seen a rise of 3.0% in RevPAR, thanks to the ability of French hoteliers to maintain their average daily rates in a growth trend. Also highly dependant on American customers, the hotel industry in Great Britain saw a weak month of July, with a 4.9% drop in the RevPAR. Finally, the situation in the Netherlands seems not to have improved in the short term. With a 7-point drop in the occupancy rate, and 7% fall in the average daily rate, the RevPAR in the Dutch chain hotel industry, greatly affected by the hazards of the international economic condition, was down in July by more than 15% versus July 2002.

Without a doubt, July 2003 will not be remembered, from a results point of view, as the most enthusiastic month in recent years. Nevertheless, it marks the affirmation of new summertime hotel habits: shorter stays, but more frequent, last-minute reservations thanks to the internet, more volatility in the choice lodging accommodations, etc...enough new challenges to enable professionals of the sector to succeed.

Methodology

This study is based on a sample of 6,000 corporate operated chains in Europe, representing 560,000 rooms. The data, gathered monthly from each hotel, is redressed according to the segmentation of the corporate operated hotel chain supply, and by the weight of each country in the European Union. .

MKG Consulting has the largest hotel database in the world outside the USA, with the best representation of all the hotel segments.

Contact:

Georges Panayotis
+33 (0)1 56 56 87 90
bdd@mkg-consulting.com
http://www.mkgconseil.com
Also See: Finally a Month of Strong Rises in the German Hotel Industry / MKG Consulting / July 2003
Hotel Industry in Europe: Record Drop in the RevPAR in April 2003, But Slight Decrease of the Mid-term Trend / MKG Consulting / May 2003
The Worldwide Ranking of Hotel Groups 2003; The World’s Top Ten International Groups Increase Their Supply by 2.6% / MKG / April 2003
The French Hotel Industry Confirms its Solidity in 2002 and Serenely Forecasts a Year 2003, Despite Geopolitical Instability / MKG Consulting / Feb 2003
European Hotel Industry: Like Last Year, France is Doing Better than all its European Neighbours in 2002 / MKG Consulting / Jan 2003
European Hotel Industry: An Encouraging Month of October / MKG Consulting / Dec 2002
Europe’s Hotel Industry: France Posts Record Performance for September, 2002 / MKG Consulting / Oct 2002
Assessment of the Summer Season for the European Hotel Industry / MKG / Oct 2002


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