Hotel companies across the globe started 2007 on a wave of optimism. Figures from the World Travel and Tourism Council indicate that travel, both business and domestic, were at record levels in 2006. People are flying in record numbers and the rise of the low-cost carrier has lead to a windfall for a number of destinations across Europe and the United States.
Investment levels in the industry are at record levels with merger & acquisition activity showing no signs of abating and the introduction of UK REITS creating a buzz in the investment community.
Hotel performance also is approaching record levels. The almost mythical levels of rate and occupancy in 2000 are fast approaching again and the market remains bullish, but what has happened since the end of last year and is all of the confidence being translated into results?
Let’s start by looking at the end of last year and where we finished. The American market, starting to be dogged by oversupply and a slowing economy, not to mention the effects of hurricane Katrina, grew by 7.5 percent in 2006. Europe, buoyed by the World Cup grew by 11.6 percent (with the UK market growing by 12.5 percent) and Asia grew by a whopping 20.1 percent. Several key destinations experienced impressive growth in 2006 with Moscow, Dubai, Amsterdam, Berlin, Paris and London exceeding expectations. So how are selected markets looking after the first quarter of 2007?
The answer is very positive. Moscow dropped slightly, but is almost alone amongst the top destinations and has such a low occupancy relative to the other cities that there is good room for growth. London has grown by over 18%, Paris almost 11 percent, Amsterdam by over 13.5 percent, Berlin and Dublin by 8 percent, Edinburgh and Stockholm by almost 8 percent and a whole raft of other cities in positive territory.
On a global level, the US market has grown 5.2 percent in RevPAR during the 1st Quarter of 2007, Europe has 8.1 percent growth, and the UK market grew by 12.0 percent and Scandinavia by 10.6 percent. Only Asia seems to be underperforming, with only 4 percent RevPAR growth so far, although this might just be a hang over after last year’s extraordinary performance.