April 2004 - Amsterdam hoteliers experienced another challenging year in 2003. Results from the HotelBenchmark Survey by Deloitte show that of the seventeen cities tracked across the euro-zone it was hotels in Amsterdam that witnessed the largest decline in revenue per available room (revPAR) during 2003. Hotels in the city-centre saw revPAR fall by 13.2 percent on the prior year, whilst hotels at Schiphol saw even greater declines of 20.5 percent.

Whilst a number of euro-zone cities have seen a marginal improvement in performance during the first two month of 2004, Amsterdam has continued to struggle. With the exception of Athens it is the only market to report in double-digit revPAR declines during the first two months of 2004. So why is performance still in the doldrums and more importantly when is the situation likely to improve?

In 2003, the Netherlands saw GDP contract by 0.8 percent, the first negative growth since 1982. In addition to the country�s economic situation the events of 2003, including the war in Iraq and SARS have placed even greater pressure on the Amsterdam hotel market.

According to preliminary figures from the Netherlands Board of Tourism & Conventions visitor numbers to the Netherlands declined by six percent in 2003. Latest tourism figures for Amsterdam show that the city attracted 4.1 million visitors in 2002, with visitors from the UK and United States accounting for 23 percent and 14 percent of these arrivals. Not surprisingly, these were the two markets that saw the largest fall in visitor numbers in 2002, as fear of air travel increased after 9/11.

Although Amsterdam typically manages to achieve the highest occupancy of any city in European, this gap has started to narrow over recent years. In 2003, occupancy in Amsterdam reached its lowest level for seven years, with occupancy in London only 0.1 percent away from knocking the city off the top spot.

The table below shows that since the record year of 2000, Amsterdam�s revPAR performance has dropped by 23 percent. The strong performance during 2000 was largely attributable to strong demand from the conference market as well as the Euro 2000 football championships. Since then revPAR has fallen each year, with the largest declines witnessed in 2003. It seems that the demand created in 2002 by events such as the �Floriade� horticultural exhibition, (attracting 2.3 million visitors) has been difficult for the city to sustain in 2003.

Airport performance

Hotels at Schiphol airport have been hit even harder than those in the city-centre. 2003 saw revPAR at Schiphol fall from €87 in 2002 to €69 in 2003. Typically hotels at 

Schiphol have benefited from any overflow of demand from hotels in the city-centre, this however has not been the case in recent years given the spare capacity in the city. To further compound problems, the market has recently witnessed a large increase in room supply with the Dorint-Sofitel Schiphol Oost (442-rooms) and Etap Amsterdam Airport Hotel (118-rooms) both opening in 2003. Looking to the future the good news is

Dorint-Sofitel Schiphol Oost

Changes to supply

According to the Amsterdam Tourism & Congress Bureau Amsterdam has 330 hotels with 17,156 rooms. Between 1999 and 2003 approximately 1,600 new hotel rooms were added to the market, the majority of these took the form of extensions to existing properties rather than new builds.

New supply continues to be constrained by a lack of sites as well as strict building regulations in the city-centre. Despite this the Amsterdam authorities are encouraging new hotel development however given the limited availability of land in the city-centre, the majority of future supply is planned for the outskirts of the city. A large number of new projects are currently in the pipeline and it is expected that between 2004 and 2006 some 4,100 new hotel rooms will open in Amsterdam.

Transactional activity

There was only one major hotel transaction in Amsterdam in 2003, the sale of the 182-room Sofitel Grand Hotel to Accor. The small number of transactions is not a reflection of a lack of interest from investors but more due to the fact that very few hotels have been put up for sale. Despite the performance of the hotel market over recent years, investors continue to regard Amsterdam as a strategic and profitable location and therefore have few reasons to sell.

Notes: 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 6,000 hotels and 1.2 million rooms every month.