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Euro-zone Hotel Performance Improves Five Percent in June

A rise in occupancy helped hotels in the 12 euro-zone countries improve revenue per available room (revPAR) by five percent in June 2004, according to the HotelBenchmark Survey by Deloitte
. This is the fourth consecutive month that the euro-zone has reported revPAR growth and like the previous months occupancy (up by five percent) was the driver of growth. Disappointingly after two months of average room rate improvement, rates came under pressure again in June, falling by 0.3 percent compared to June 2003. Across the euro-zone, luxury hotels were the only category to report any average room rate growth in June, up 2.4 percent. Budget hotels experienced the largest decline with average room rates falling 1.8 percent. All categories of hotels experienced occupancy growth during the month. However for luxury hotels this improvement was limited to just 0.5 percent, compared to 4.1, 5.0 and 5.1 percent for the budget, mid-market and first class sectors respectively.

As highlighted in the last edition of In the Know, Portugal was the region’s star performer this month with revPAR growing an impressive 67 percent. With a captive market for the Euro 2004 Football Championships hoteliers were able to grow room rates by a staggering 61 percent to reach €178. Greece, Italy, the Republic of Ireland and the Netherlands were the only other markets to report any room rate growth in June. However, with the exception of Greece - which is preparing for the upcoming Olympics Games - the growth was negligible. Hotels in Austria reported the most significant occupancy gains in June, up 12 percent. At 79 percent the country also reported the highest occupancy of any euro-zone country.

Despite the encouraging June results, a cloud still remains over the muted recovery in the euro-zone. Admittedly against weak 2003 comparables revPAR is up three percent, but the cumulative trading performance of the last 12 months, as shown in the table below, reveal that no growth in revPAR has occurred. The 1.6 percent improvement in occupancy over this period has been entirely offset by a corresponding fall in average room rate. For the 12 months to June 2004 all hotels in the euro-zone reported occupancy of 62 percent and an average room rate of €103. During this time half the euro-zone countries experienced an improvement in occupancy, but only three countries - Austria, Italy and the Republic of Ireland - have managed to combine this with any room rate growth.

Commenting on the results, Julia Felton, Executive Director of HotelBenchmark said: “As we approach the strong conference months of September and October, we remain optimistic that further improvements in revPAR will continue. We believe growth will continue to be driven primarily by increased occupancy, rather than room rate in the short term. With the corporate re-contracting period approaching we hope that hoteliers will seize the opportunity to push average room rates upwards, and so improve profitability levels in 2005.”