Poor Year For Dutch Hotel Industry - Horwath Releases HOSTA 2003 Report

2003 threatens to be a poor year for the Dutch hotel industry. This is shown in the HOSTA 2003 report from Horwath Consulting. The average occupancy will be 67% in 2003, agains 71% in 2002. De average room rate drops from € 114 to € 101. The main causes for the poor results are the economic slump, the war in Iraq and the SARS epidemic. It is expected that the recovery will not commence before the second half of 2004.
Last year, hotels already feared for the consequences a possible war in Iraq would have for the Dutch hotel industry. This year, those fears have proven justified. Due in part to the war, the results for 2003 will end up far below budget. The rise of SARS, however, was not expected. Now, hotels are expecting 5% lower occupancies and 6% lower average room rates. As a result, the total revenues may turn out almost 11% lower.

For 2004, the hotels are more optimistic. It is expected that both occupancies and average room rates will increase again, says Ewout Hoogendoorn of Horwath Consulting. “Under the influence of economic growth in the U.S., the economy in Europe will also make an upturn. As a result, the demand for hotels also increases.”

Despite the dropping occupancies, the profitability of the Dutch hotels remains high, according to Horwath Consulting. The gross operating profit dropped only 1.5 percentage point, from 40.3% in 2001 to 38.8% in 2002. In 1993, the year of the last major hotel crisis, the profits dropped below 23%.

Hotel real estate - According to Horwath Consulting, the awareness of hotel real estate has increased. Now that the office real estate market is confronted with large vacancies, the hotel industry turns out to be a good alternative. “Many office projects are looking for a different solution,” says director Ewout Hoogendoorn. “It often turns out that a number of transitions need to be made first.” Compared to offices, hotels often offer lower lease amounts, as well as lower ground costs. On the other hand, the lease contracts are based on much longer terms.