European Chain Hotels Market Review – December 2012

Hotels in Warsaw and Dublin topped the European profit growth charts in 2012, as demand in Warsaw was fuelled by the 2012 FIFA European Championships and hotels in Dublin matched the profit growth of the Polish capital as demand returned but supply remained static, according to the latest HotStats survey by TRI Hospitality Consulting.

Hotels in Warsaw and Dublin topped the European profit growth charts in 2012, as demand in Warsaw was fuelled by the 2012 FIFA European Championships and hotels in Dublin matched the profit growth of the Polish capital as demand returned but supply remained static, according to the latest HotStats survey by TRI Hospitality Consulting. 
Poland was joint host of the Euro finals this summer alongside the Ukraine, and the capital Warsaw played host to several major fixtures, including the semi-final between Germany and Italy. In June, hotels in the Polish capital were able to drive average room rate to achieve an uplift of 161.3% to €253.55, fuelling a 195.6% increase in profit per available room. 
Warsaw remained a popular destination for tourism during the summer, which helped to offset the 14.9% year-on-year decline in profit per room in the last quarter of 2012 as demand from the business sector plummeted. Despite the shaky end to the year, the city achieved a remarkable year-on-year profit increase of 22.7% in 2012.
This outstanding profit growth was equalled by hotels in Dublin, with the increase not borne out of an extraordinary event causing a spike in demand as in Warsaw, but as a result of a consistently strong performance throughout the year. A 15.1% year-on-year increase in RevPAR was achieved in Dublin as room occupancy increased by 5.4 percentage points and average room rate by 7.3% to €132.79.
The Dublin hotel market has not been without its challenges in recent years, but the RevPAR of €107.35 in 2012 represents a 30% increase from €82.54 in 2010, which has been led by an increase in room occupancy of almost 15 percentage points, from 64.3% in 2009 to 80.8% in 2012. At €58.21, the profit per available room for Dublin hotels represents a 48.3% increase from the 2009 position at €39.24.  
“The impact of the economic downturn on commercial development in Ireland has prevented significant further additions to bedroom supply, which has remained relatively stable at approximately 19,000 bedrooms since 2010. The static supply and increases in demand, created by a boost in tourism as a result of the 9% VAT rate on the hospitality and tourism sectors, have contributed to Dublin’s strong performance growth in 2012,” said David Bailey, deputy managing director at TRI Hospitality Consulting.
Somewhat less surprisingly, hotels in London recorded yet another year of profit increase, which was helped in 2012 by the strength of demand associated with the Olympic and Paralympic Games. In 2012, hotels in London’s four and five-star sector achieved a 6.4% increase in profit per available room, with the greatest contribution to growth achieved in August, as hotels in the capital achieved a year-on-year increase of 107.3%.
2012 – Spotlight on Athens
Profit plummets in Athens as hotels suffer declines in price and volume in 2012
2012 has proved to be one of the most challenging years of operation for hotels in the Greek capital, with year-on-year profit per available room plummeting by around 65% to just €8.04 as the city has rarely had a stable month of trading, according to the latest HotStats survey by TRI Hospitality Consulting.
Greece’s recent economic and political instability has resulted in widespread negative publicity regarding Greece, and Athens in particular, as a destination for leisure and business tourism. This is exemplified by the American and Australian governments recently issuing warnings for travellers to Greece, further diminishing the appeal of the city and potential to attract tourists.
The tough austerity measures have also impacted travel budgets for the Greek population and Athens, as a traditional holiday destination, has not enjoyed the same levels of domestic tourism. Consequently hotels in the Greek capital experienced a year-on-year decline in room occupancy of 7.2 percentage points in 2012, with occupancy falling to a low of 25.9% in December.
In addition to the drop in volume, hoteliers in Athens have also suffered a decline in achieved average room rate, which dropped by 6.7% to €155.27, further contributing to deteriorating profitability levels. Achieved rates are down across most sectors including groups/tours (-7.3%), corporate (-9.8%) and leisure (-15.8%), whilst rates in the non-discounted Best Available Rate increased, somewhat surprisingly, by 2.7%.
Despite the drop in 2012, hotels in the Greek capital achieved the third highest achieved average room rate of our European markets polled this month, ahead of Berlin (€111.67), Madrid (€119.91), Warsaw (€108.19) and Prague (€83.37).
But the weak room occupancy left Greek hoteliers close to the bottom of the pile in terms of RevPAR at €75.45, above only Prague at €57.03.
“Market conditions in Athens have undoubtedly been tough in 2012, but the selection of Piraeus port as the home for a number of cruise companies such as Royal Caribbean, coupled with the projected investment to enhance the services and appeal of the capital’s port, create an opportunity for hoteliers in Athens to capitalise on this new source of demand and claw back some of the lost profits. But it is a long road back from the declines the hotel market has suffered in recent years,” added Bailey.
Whilst profit levels in Athens suffered a huge decline in 2012, overall the year has ended in positive territory. This is in contrast to the performance in the Greek capital during a number of months this year when hoteliers have suffered negative profit levels per available room, as in January (-€21.23), February (-€12.43), March (-€11.74), April (-€21.77), November (-€12.16) and December (-€19.23).
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TRI Hospitality Consulting provides a wide range of services to clients in the hotel sector. It has offices in London, Dubai and Madrid.

For more information contact:

Jonathan Langston, managing director 020 7892 2201

jonathan.langston@trihc.com

David Bailey, deputy managing director 020 7892 2202

david.bailey@trihc.com

Charles Scudamore, director 0207 892 2211

charles.scudamore@trihc.com