October 2004 - Italian city centre hotels reported growth in revenue per available room (revPAR) during the first eight months of 2004 halting two years of decline. Year-to-August figures from the Italian edition of HotelBenchmark Survey by Deloitte show that five of the six cities tracked managed to improve their performance compared to the same period in 2003. However, despite this, revPAR still lags behind previous years.

Still some way off the 2001 peak

As shown in the graph below, despite improvements year-to-August 2004 hotel performance is still below the 2001 peak. An increase in overnight stays helped push 2001 performance to a six year high. Italy reported 178m overnight stays year-to-August 2001 � a growth of 4% on 2000. This increase in demand helped improve average room rates and thus revPAR results.
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Latest figures on overnight stays in Italy show a slight decrease in 2004 compared to 2003. ISTAT, the Italian statistic office, reported 52.3m overnight stays during the first four months of the year compared to 52.8m during the same period in 2003. Despite this, according to ENIT, the Italy state tourist board, spending by foreign visitors for year-to-May 2004 increased 13% compared to last year.

After two years of declines, hoteliers in Florence, Rome, Milan, Bologna and Turin all experienced revPAR growth during the first eight months of 2004. Improved occupancy levels drove the revPAR upturn in all cities except Milan where occupancy remained static. Interestingly 2004 results show that Milan and Florence achieved their highest average room rate since 1999 for the year-to-August period.

Surprisingly, Venice has not followed the same trend as the other Italian cities tracked. Year-to-August figures for Venice show a 5% decline in revPAR compared to 2003. Falling average room rates partly due to increased competition from new hotel openings have impacted revPAR across the city. Despite this, Venice continues to report the highest revPAR of the six cities tracked. Year-to-August 2004 revPAR reached €140 some €32 higher than Florence the second best performing city in Italy.

The pace of recovery

Whilst Italy�s city centre hotels seem to be recovering, resort markets do not seem so lucky. According to the President of the Hotel and Tourism Association, Bernado Bocca, the Italian tourism industry endured its most difficult summer for a decade. Calling for reforms at the country�s annual tourism conference, held last month, he said that the number of overnight stays had declined over the June to August period. Weak economic conditions were blamed for the fall in domestic stays as well as the decline in visitors from main source markets such as Germany and Austria.

Conference delegates called for greater investment in tourism to help promote Italy as a tourist destination. The country currently invests €24.4m each year in the tourism industry, less than its main European rivals Spain (€102.6m), France (€73.6m) and the UK (€35.5m).

In terms of the country�s economic performance the Economist Intelligence Unit (EIU) has recently revised its gross domestic product (GDP) forecast for Italy upwards to 1.2% this year. Although improving, the pace of economic recovery in Italy remains behind that of other major European countries. The EIU expects GDP in the UK, France and Germany to increase by 3%, 2.3% and 1.7% respectively during 2004.

Modest results so far

After two years of declines, the majority of Italian city centre hotels are once again experiencing positive revPAR growth. Only Venice has yet to turn its fortunes around. Despite achieving the highest average room rate of the six cities, Venice continues to report revPAR declines. Although, Italian city centre hotels still have a long way to go before their performance is back at 2001 levels, performance is at last moving in the right direction. With the return of international demand as well as improved economic outlook hotel performance in Italy should continue to recover at a moderate pace.

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.