Market Reports

The European hotel industry continued its recovery in October

After two months of clear improvement, the good results of the European hotel industry continued at a more moderate pace. RevPAR rose by 0.6% in October.

MKG Hospitality The medium-term improvement continued. The occupancy rate and the average daily rate progressed favourably over 12 months, for a RevPAR rise of 3.4%.

Though Spain is trailing, hotel results from the United Kingdom demonstrate a return to activity, with a RevPAR on the rise by 8.1% over 12 months.

Monthly results for corporate hotel chains by category in Europe* for October 2004

Source: MKG Consulting Database - Official chain hotel statistics - November 2004
Average Daily Rate and RevPAR expressed in euros incl. of tax
* European Union of 25 member-states in 2003 and 2004


Budget categories drive RevPAR growth

The month of October is traditionally good for business tourism, with numerous exhibitions and meetings, however October 2004 was not able to compensate for the drop recorded at the same time last year (-2.1%) versus 2002. At the European level, the number of customers remained even (-0.1 points). With a very slight rise in average daily rates of 0.7%, the overall RevPAR remains very close to the level registered last year at the same time.

During October, the euro held steady at a record high against the dollar, causing a lower budget of customers whose purchasing power is measured in the American currency. We therefore see that it is the midscale and upscale hotels that are having the most difficulty maintaining business levels.

Results by category show the good health of the budget and hard-budget categories, with average daily rates significantly higher despite a drop in occupancy rates. RevPAR are therefore still positively oriented in these categories.

On the upmarket segment, the maintaining of average daily rates at their former levels is accompanied by a slight rise in occupancy leading to a rise in RevPAR.

Only the midmarket category fell in October. The drop in average daily rates did not allow maintaining occupancy rates. This segment must therefore deal with the concessions granted in previous months by upscale hotels that therefore managed to attract customers that previously turned to 3* hotels.


Results of corporate chain hotels by category in Europe*
total over 12 months at the end of October 2004


Source: MKG Consulting Database - Official chain hotel statistics - November 2004
Average Daily Rate and RevPAR expressed in euros incl. of tax
* European Union of 25 member-states in 2003 and 2004


Over a 12-month period, results nevertheless remained clearly positive. RevPAR posted a rise of 3.4%, beginning with the +2.3% recorded at the same period last year. This encouraging result is tied to the improvement in average daily rates in the context of a return to growth in occupancy rates.

The majority of European countries posted rises in RevPAR in the medium term

This positive trend over 12 months is shared by nearly all European countries, confirming the return to good health of the sector in nearly all of Europe. Spain is nonetheless the only country to post a RevPAR that was down over a twelve-month period (-5.9%). The growth in supply has increased competitive pressure in the major urban centres, leading to hotel results even more sensitive to economic downturns, as has been the case in recent months.

Results of corporate chain hotels by country in Europe*
total over 12 months at the end of October 2004


Source: MKG Consulting Database - Official chain hotel statistics - November 2004
Average Daily Rate and RevPAR expressed in euros incl. of tax
* European Union of 25 member-states in 2003 and 2004


Over 12 months, the hotel industry in the Netherlands hit even in the end of October. Rate drops eventually allowed a rise in occupancy rates that was great enough to lead to an increase in RevPAR. This seems to show the slow but steady improvement in the sector in this country, particularly exposed to changes in the number of international customers. The situation is rather similar in Belgium, where stimulation through rate drops led to an improvement in RevPAR.

Germany also saw a recovery led by occupancy rates that improved overall. The chain hotel industry of that country is characterised by a large dependence on business customers. The variability in occupancy rates is highly marked by drops during the weekend or holiday periods. At the same time as the return of business customers to German hotels, rate strategies are still looking towards diversification in customer types in order to improve occupancy levels - still among the lowest in Europe. In France, growth in RevPAR has been sustained by rises in the average daily rates. The United Kingdom, which previously saw drops in RevPAR, recovered rapidly, seeing growth in this indicator; Over a twelve-month period, the UKs RevPAR rose to 8.1%. The country this can boast the highest progression in Europe.

These results demonstrate that there has been an improvement in activity in Europe in 2004, and we can count on this trend to continue in 2005. Nonetheless, the upcoming changes in crude oil prices and the value of the dollar risk diminishing the rate of this recovery.

For additional information,
please contact the Database Department at +33 (0)1 56 56 87 87
bdd@mkg-consulting.com or Georges Panayotis at +33 (0)1 56 56 87 90



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