European Chain Hotel Supply Grew Again in 2009 Threatening Performance Recovery

Otus today reports the preliminary results of the 2009 analysis of hotel chain supply in Europe. Chain room supply grew by 2% net in the calendar year 2009, increasing room stock by more than 40,000 rooms.

This comes on top of 3% net growth in 2008, which added 56,000 rooms and 3% net growth in 2007, which added 46,000 rooms. In total, over the downturn, more than 140,000 rooms were added to chains in Europe – and this will be a drag on the rate of recovery in 2010.

The pattern of growth in 2009 is also important. Only a handful of new chains emerged. New build growth in 2009 was 3%, the same rate as 2008. Migration from unaffiliated hotels to chains was also flat at 1%. The decline in growth came from an increase in the number of hotels leaving the chains, or leaving the market completely.

The nine global major chains accounted for 25% of the net supply growth in Europe. Accor grew its net supply by 2%, 4,000 rooms; Carlson, through Rezidor and Park Plaza, grew by 6% from a smaller base ; InterContinental by 2% and Wyndham 5%. Hilton added 1,000 rooms, Choice 2%, Marriott only 1% – while Starwood Hotels and Hyatt saw their portfolios shrink.

The five European majors accounted for 9% of the net supply growth in the region. In the UK, Premier Inn added 1,900 rooms and its rival Travelodge 1,600 rooms. Scandic added 900 rooms; NH added 600 rooms and took on the management of the Hesperia hotels, while Sol Melia shrank by 1,000 rooms.

Ian Gamse, Otus director responsible for the Otus Hotel Brand Database, commented: ‘We enter 2010 with more hotel rooms chasing demand in a challenging market. Within the coming weeks we will be announcing more detail about the growth and its implications for individual countries and companies.’

Paul Slattery, co-founder and director of Otus, added: ‘We expect lower supply growth in 2010, however the recent growth together with demand challenges will make consolidation among chains a priority.’

Otus provides strategic advice and corporate finance services to the hospitality and travel sectors. The Otus Hotel Brand Database, established in 1983, tracks every chain in Europe, enabling complex analysis of patterns of supply. Otus also tracks hotel demand and the economic underpinnings of the hotel market across the world to advise most of the major chains, many other operators, owners and the capital markets.