• The third trimester of 2005 ended with positive results for the European hotel industry, whose RevPAR increased by 2.4%, despite London�s terrorist attacks and the still uncertain international climate. There has particularly been an increase in long haul clients.

• Scandinavia and the new EU countries, with Hungary and Poland leading the way, are doing very well and show the best results.

• The effects of the London attacks seem limited. The United Kingdom�s results remain positive and this trend is also returning to Spain, Italy and the Benelux. 

• In France, the Parisian up-scale hotels pull up the national results. The suburban revolts in November do not seem to have influenced the results of the concerned hotels.

The summer situation could, however, have been difficult after the attacks in London or the alerts of the spreading bird flu. The year 2005 was also one without the Olympic Games which logically penalised Athens� and Greece�s hotels in particular.

September�s results clearly confirm the positive trend: The RevPAR shows a progression of 3.6% on the European Union�s scale. Both business and leisure tourists have adapted to the uncertain environment. 

Since the beginning of the year, the international long haul clientele has also been more dynamic. This is notably the case with the American clientele, whose return have been noticed with interest by the hotel professionals. Room nights generated by this clientele particularly contribute to the average room rates because of a superior spending capacity. Benefiting from a healthier economy compared to 2004, the Japanese have also made their return this year.

Concerning the European clientele, the economic conditions remain behind those of other areas in the world, particularly the USA. However, the third trimester confirms an economic comeback, notably in France and Germany, joined by the United Kingdom whose economy has seen a significant improvement these last few years. In Spain, in spite of the still vigorous economic growth, the speed of the hotel supply development continues to weigh down results. Globally across Europe, however, a situation more favourable to trade reassures the progression of business room nights, which straighten the occupancy rates and the RevPAR measured since the beginning of the year. 

Only one monthly RevPAR decrease in 5 years for budget hotels in France

During the 9 first months of 2005, the RevPAR increased by 2.8%. For all categories combined, occupancy rate has risen by 0.4 points but it is the up-scale hotel sector that has benefited the most from the increased activity. 

Other hotel categories also show positive RevPAR evolution. The budget hotel sector continues to show its resistance in spite of the large increase in supply. The last five years have only seen one month with a decrease in RevPAR for the budget hotels. The 2* and 3* segments are equally pointing up thanks to an increase in average rates.

After an encouraging beginning of the year, September took on a strategic character to confirm the trend of a comeback in the sector. In Paris, where September 2005 succeeds an excellent September 2004 (+7% increase in RevPAR), one could fear a more timid month as this year the hotels did not benefit from the Motor-show (Mondiale Automobile) during the last week of the month. However, the capital�s results are stable (+0.9% in RevPAR) confirming the stability of the comeback. The cooling down of the exchange market with a weakening of the Euro against the Dollar, favours the return of the clientele whose buying power is based on the Dollar. At the same time, the economic growth shows positives signs.

The recent events in the suburbs do not seem to have had an impact on the hotels situated in the concerned communities. Located by motorway exits, crossroads of main transportation routes, the hotels in the periphery are rarely in the heart of a suburb.

It therefore seems that 2005 is heading towards the results predicted by MKG Consulting at the end of 2004 (+3% to +5% increase in RevPAR), confirming the scenario foreseen by MKG Consulting of an accelerated increase in average rates during 2005 as a whole, following the improved occupancy rates of last year.

Going towards an improvement on the main markets

During the three semesters of 2005, the hotels establishments in the United Kingdom show an average progression in RevPAR of 3.4%. At the end of June, the achieved increase in RevPAR rose to 5.9%. The third trimester of the year did, however, show a slow down in the hotel activity. The London attacks can be directly linked to these results. The occupancy rate in the British hotel industry fell by 2.3 points in July and by 4.0 points in August. In London, the decrease is clear: �3.1 points in July and -9.1 points in August. If the levels of occupancy are still reduced in September 2005, the situation still seems to improve in the British capital where the RevPAR, thanks to significant increases in average rates, is practically stable. The occupancy rates are still very high, at more than 80% in September and the year to date figures remain positive.

The acts of terror that struck the city at the beginning of July do not seem to have left any long-lasting effects on the London tourist activity. One can probably expect a slowing dynamism in the country. The United Kingdom has in fact seen a comeback phase earlier than most other European countries marked by an increase in hotel performance indicators. Even before the attacks, the levels attained in terms of average rates left small margins for new progressions. The economic growth, amongst the most dynamic in Europe these last few years, has also begun to show signs of slowing down. During the third trimester, the GDP, according to official statistics institutions was less steady than in France or Germany. Even if cities like Manchester are still seeing a positive growth in RevPAR, the outlook elsewhere seems less favourable as for example in Birmingham (-0.3% change in RevPAR at the end of September 2005).

In Germany, corporate hotel chains are very oriented towards the business clientele, as well as the fairs and commercial exhibitions clientele. The business activity during the first semester of 2005 was very irregular. April 2005 showed a record increase since 5 years: +22.5% increase in RevPAR. May was much less positive (-17.1%). July and August are weak months that do not contribute much to the yearly results because the business clientele are is then very small. In September, activity is much greater. The third semester is like the rest of the year. The situations vary a lot from one month to another and from one market to another. Düsseldorf whose activity in 2004 was aided by major events (the Drupa, dedicated to printing boosted the month of May) found 2005 to be more difficult with RevPAR decreasing by 4.8% during the 9 first months of the year. On the contrary, Frankfurt has seen an increase in activity this year, particularly in September due to the successful Automobile Fair: +15.3% for the month. Besides these specific local situations or the increased activity due to an event, the German hotel industry is characterised by some of the lowest occupancy rates in Europe. The development of the hotel supply in the last few years weighs down the levels of occupancy. This situation limits the average rates that have been decreasing since the beginning of the year, leading to a very moderate RevPAR growth (1.9%).

Spain is characterised even stronger than Germany by its large development of hotel supply and the results saw a significant decrease in 2004 (-7.3% in RevPAR) in spite of a dynamic economic growth. The first semester in 2005 also showed a decrease. The stabilisation of the occupancy rates, nevertheless seems to show the first sign of a change in the trend: at the end of the first semester the RevPAR fell by only 4.5% and the decrease of the occupancy rate was held back (+0.2 point). As MKG Consulting announced, the summer season confirmed an improved situation. August and September, in particular, saw the RevPAR of the Spanish hotel industry increase by 4.1% and 2.3% respectively. If the situation still seems problematic in Barcelona or Valencia for example, where the RevPAR are forced down due to decreasing average rates, Madrid measured a rise in RevPAR due to increased occupancy rates, a sign of dynamic demand.

Like the situation in Spain, Italy registered a decrease in its year to date RevPAR at the end of September but the country is in a stage of improvement: the RevPARs are nevertheless improving, particularly thanks to a very good August. The situations remain varied between the different markets of the peninsula. The Milan hotels once again show a year to date decrease in occupancy rates and RevPAR at the end of September but since June the results are again generally positive in the Lombardy capital. The situation is even better in Rome where the city benefits from a development of business hotels and shows a strong progression in occupancy rates.

The Benelux countries, where the hotel business is very linked to the international affairs activities due to limited domestic markets and the opening of their economies, benefit from the dynamism created by international trade. Occupancy rates and average room rates are increasing to reinforce the RevPAR progression. During the first three trimesters, the RevPAR increased by 3.4% in Belgium and 4.1% in the Netherlands (compared to 3.1% and 2.2% respectively at the end of the first semester).

And so, at the end of the third trimester 2005, the European hotel industry uniformly confirms its persisting comeback that begun in 2004. The current events are not favourable but the improvement is, however, there. It took 15 months after the Gulf War to bring back RevPAR growth in France. After the September 11^th attacks, 11 months were necessary for growth to begin again. In Madrid, the situation equally required 11 months in spite of the growth of the unfavourable supply. In London, 3 months were enough to more or less stabilise the RevPAR. More and more reactive, the hotel industry is adapting much faster to international events and the budget hotel sector in particular, whatever the situation, continues to improve its performances. 

Methodology

MKG Worldwide is the leader in Hotel, Tourism and Catering consulting, and has the largest database in the world, outside the USA, with a good representation of all hotel segments. The database of MKG contains a sample of 10,000 corporate chain hotels, representing 1,000,000 rooms. 

Since September 2004, the MKG Database offers a programme that allows the daily monitoring of hotel indicators for each hotel of a sample that in July 2005 already included 1,000 hotels.