A survey of 4,000 consumers from the UK, Germany, Italy and Spain and has shown how purse strings have remained firmly tightened when it comes to leisure and business travel in 2010, following the market challenges experienced in 2009.

The Deloitte survey was conducted in conjunction with TNS Research International ahead of the 22nd Deloitte European Hotel Investment Conference.

In Italy, Spain and the UK, the number of respondents who stayed in a hotel during the last 12 months has remained very flat year-on-year, rising slightly from 60% to 63% in the UK and Spain and from 64% to 65% in Italy.  In contrast, the number of German respondents to have stayed in a hotel in the last year rose strongly from 45% to 55%.

Marvin Rust, hospitality managing partner at Deloitte, comments: “Hoteliers in Germany have benefitted from the biennial trade fair cycle and many will have also seen a boost from the reduction in the rate of VAT on accommodation from the standard rate to 7%, introduced at the beginning of 2010. The leap in hotel stays in Germany in 2010 compared to 2009 demonstrates perfectly how the power of perception can influence the decision making of the consumer.  The VAT rate may have been slashed to 7%, however in reality the saving has not necessarily been passed onto the consumer.”

The outlook looks less certain for the coming year though.  Across all four countries, consumers have indicated they will be making significantly fewer leisure and business trips in 2011 compared to 2010 as the continued uncertainty in the market takes its toll.  For example, in the UK as the effect of the Spending Review starts to show and the rise in the VAT rate from 17.5% to 20% comes into force, we are likely to see consumer and business budgets squeezed and belts tightened further.

Rust continues: “The major concerns emerge when we compare our survey findings with the operators’ recent announcements about the future.  Their expectations of growth, increased frequency and price of stay directly conflict with those of the consumer.  The price of stay, for example, can only be increased where there is strong demand.  Our research indicates otherwise and operators may in fact be forced to reduce their price.  The industry is maybe more bullish than perhaps it should be.

“In addition, as if hotels didn’t need to be reminded, the customer is still definitely king.  Loyalty only extends to a particular hotel chain as long as it relates to competitive prices.  The room’s facilities ranks top amongst all four countries’ consumers as the deciding factor when choosing a hotel.  And when asked to rank their future ‘wish-list’ of services and facilities, the response from consumers was unanimous, free WiFi and free bottled water were by far the preferred options.”

Social media - learning a tough lesson

70% of more than 100 senior hospitality industry figures surveyed recently ranked TripAdvisor as the source of information most likely to influence a consumer when choosing a hotel, closely followed by personal recommendations from a friend or family member (67%).

Nick van Marken, Deloitte global head of advisory - tourism, hospitality & leisure, says: “This is a positive response from operators as it indicates they have recognised the potential impact, both positive and negative, travel review sites can have on their business.  Indications are that hoteliers are in fact embracing the platform and actively encouraging their visitors to provide their feedback on the travel review site.”

When it comes to Facebook or Twitter, a third of Germans (31%), over a quarter of Italians (26%) and 31% of Spaniards said they would look for comments on these social networking sites before choosing a hotel.  By comparison, just 10% of hotel operators thought consumers will be influenced in this way when choosing a hotel.

van Marken adds: “Social media has prompted the emergence of a new breed of confident, empowered and savvy travellers.  Whilst the transparency it offers represents a real challenge for brand owners, it also gives unparalleled opportunities for consumer feedback and opens new channels of communication between the brand and its customers.  Travel review sites have come into the media spotlight for more negative reasons this year, and some operators have got quite agitated.  This said, with internet access set to increase by around 50% by 20151 public scrutiny is here to stay.  One can only imagine where the market will go once alliances and links between some of the bigger players and sites occurs.”

Remaining cautious

The majority of hotel operators are expecting a slow recovery from the global recession.  69% of respondents to the pre-European Hotel Investment Conference survey are cautious in the face of fragile consumer and business confidence.  Just 7% expect a strong economic recovery however only 9% expect a double dip recession in their home country.  86% expect growth across Europe to remain stable or increase by between 1% and 5% in 2011.