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 German Hoteliers Struggle to Maintain Growth at the Same Levels
During the First Six Months of 2005; RevPAR Up Just 1.2%
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August 2005 - German hotel performance was looking good the end of 2004, with revenue per available room (revPAR) up 4.7% - the second highest rate of growth reported by any country in Europe. However, latest results from the HotelBenchmark Survey by Deloitte show that German hoteliers have struggled to maintain growth at the same levels during the first six months of this year, with revPAR up just 1.2%. 
With the Confederation Cup games complete, a potential election looming and the World Cup on the horizon, this article looks at what has been happening in the first half of 2005 and what the future has in store for the German hotel market. 

The table below shows those markets that have reported the strongest growth and declines so far this year.

Germany's winners and losers - year-to-June 2005 vs. 2004

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Occupancy (%)
Average Room Rate (€)
RevPAR (€)
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2005
2004
% change
2005
2004
% change
2005
2004
% change
All Germany 59.4 58.2 2.2 82 83 -1.0 49 48 1.2
Berlin 61.4 63.5 -3.2 88 91 -3.4 54 58 -6.4
Cologne 63.7 56.3 13.2 88 91 -2.6 56 51 10.2
Dusseldorf 61.2 59.0 3.6 92 107 -13.4 57 63 -10.2
Dresden 60.6 54.6 11.1 73 70 4.6 45 38 16.2
Essen 51.8 54.6 -5.0 79 87 -8.9 41 47 -13.5
Hannover 53.0 49.7 6.6 95 89 6.1 50 44 13.1
Source: HotelBenchmark Survey by Deloitte

The winner takes it all 

Of the 21 cities tracked across Germany over 60% reported positive growth in revPAR during the first half of 2005. Dresden saw the strongest improvements in performance with revPAR increasing by 16.2% compared to the same period in 2004. The city benefited from high demand in February, when over 50,000 people attended the 60th anniversary commemorations of the city's destruction by Allied forces in World War II. 

Hannover came second in the race, with revPAR increasing by 13.1%. Two events in May had a major impact on the city's performance - LIGNA (trade fair for the timber industry) and the 30th German Protestant Kirchentag (church convention). These attracted 96,675 and 100,000 visitors respectively. 

Cologne took the bronze medal with hotel's seeing revPAR increase by 10.2%. Three major trade fairs, FARBE (paint), IDS (dentistry) and Interzum (furniture) contributed to a significant revPAR increase of 138.7% in April. This result was further compounded by the timing of the Easter holidays, which last year fell in March. Cologne's hoteliers have also benefited from increased demand from Confederation Cup games held in the city in June. 

The not so lucky 

As illustrated in the table above, Essen and Dusseldorf saw the largest revPAR declines of any German market during the first half of the year. This was mainly due to bi-ennial trade fair demand, as several large events held in 2004 did not occur this year. Both markets saw substantial declines in May - Dusseldorf saw revPAR fall by 71.5% and Essen reported declines of 57.2%. This was mainly due to the fact that in May 2004, Dusseldorf hosted the Drupa (printing) fair. This attracted 394,478 visitors and had a spill over effect on Essen. 
The Berlin hotel market continues to suffer from ongoing supply growth. This year alone the market has seen the 251-room Express by Holiday Inn Berlin Anhalter Bahnhof open in January, the 274-room Dorint Novotel Berlin am Tiergarten and the 267-room Courtyard Berlin City Centre in June, to mention a few. This has increased further still this month with the opening of the 505-room Maritim Hotel on 5 August.

Football fever starts to grip Germany 

Next year, German hotel performance is expected to get a welcome boost when the country hosts the FIFA World Cup 2006. Demand is anticipated to be high. The German government expects that up to 3m fans will attend at least one of the 64 World Cup matches held in Nurnberg, Stuttgart, Leipzig, Berlin, Hamburg, Hannover, Kaiserslautern, Gelsenkirchen, Dortmund, Munich, Frankfurt and Cologne.
As Germany continues to prepare for this event, there is the opportunity for the country to strengthen its image as a tourist destination and attract a larger amount of international visitors. Currently, Germany largely relies on the domestic market. In 2004, domestic visitors accounted for 86.6% of the total number of overnight stays. 

This autumn the German National Tourist Board (GNTB) will publish a brochure, which provides detailed information about the 12 host cities for the World Cup. This forms the main part of the GNTB marketing campaign launched in association with the 2006 FIFA World Cup Organising Committee. The GNTB is also using trade fairs, workshops and fact-finding tours through the host cities to also raise awareness. 

In preparation for the World Cup improvements are also being made to Germany's transport system. The German government is investing €4.5 billion to upgrade its motorways and to increase the speed of rail services between key cities. The ongoing discussion about shop opening times has also been revisited, with shop owners urging for extended opening hours including Sunday opening, during the World Cup. This should not only help project Germany in a positive light with tourists but also help the country's economic performance.

Always on the move - the airline industry 

The World Cup is not the only factor expected to influence future hotel demand. Changes in the airline industry, notably the addition of new routes into Germany will make the country even more accessible. In May, Hamburg airport opened a new terminal, which will increase the airport's capacity from 10 to 15 million passengers per year. Continental Airlines has also recently launched the first daily direct flights between Hamburg and Newark in the US, which is close to New York City.

In October, Emirates will introduce the first direct flights between Hamburg and Dubai. The recent opening of a branch of the German Tourist Board in Dubai should also increase the number of Arab visitors to Hamburg and to Germany in general.

Low cost carriers also continue to expand their networks. This year has seen easyJet launch new daily services to Berlin-Schoenefeld from London Luton, Newcastle, Liverpool and Paris as well as a service to Belfast three times a week. The airline has also launched a daily service between London Luton and Dortmund and London Stansted and Munich.

Promising future? 

So far this year, German hoteliers have had a tough time keeping up the high level of performance achieved in 2004. Although the country has seen improvements in revPAR, this has been driven solely by occupancy, average room rates have in fact fallen slightly. 

Although the World Cup is looming large and airlines are increasing routes to Germany concerns remain about the market being over-supplied. According to the German hotel association (IHA) some 323 new hotels are currently under development in Germany - clearly this is likely to impact hotel performance. 

Whilst the prospect of an early election in September and a potential new government that will push through economic reforms bodes well, the reality is that this would be unlikely to impact hotel performance in the short-term. So where does that leave the market for the rest of the year? Good question. Continued occupancy growth is expected, however rates are likely to remain under-pressure. Germany should however still finish 2005 in positive revPAR territory.

Note: All analysis in Euros

The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,500 hotels and 1.2 million rooms every month. 

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Contact:

Nina Bruun
nbruun@deloitte.co.uk
+44 (0) 20 7003 6138

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Also See: German Hotel Market Sees First Positive Growth in 3 Years / Deloitte / February 2005
In Terms of RevPAR, Venice Best Perfoming Market in 2004 - HotelBenchmark Global Ranking Index by Deloitte / April 2005


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