Happy Days Are Here Again

Despite the current fascination with the Middle East and the surge in tourists in and out of China, Europe is hanging on to the lion’s share of the global tourism market. Diverse cultures, varied landscapes and a rich history make this region the number one choice for travellers.

Its continuing popularity is good news for Europe’s hoteliers, who achieved an 8.5% increase in revPAR in 2006. In US dollar terms, the Middle East saw better growth, putting both regions level in terms of absolute revPAR and average room rates.

Full year results from the HotelBenchmark™ Survey by Deloitte show that 2006 was a good year for all regions, with Asia, Central and South America, Europe and the Middle East all showing solid growth. Europe – from Dublin to Moscow – achieved revPAR of €75, with average room rates at €110.These figures, while not quite as impressive as those for in the Middle East, still represent almost double the growth rate of 2005.

Business was brisk for several reasons. Economies across the region were in good shape, European cities hosted a range of sporting and cultural events, the corporate market was strong and the number of people taking advantage of low-cost flights to visit other European countries continued to rise. Investment in the hotel industry was also healthy and the combination of all these factors meant 2006 ended more positively than 2005.

BIG TICKET ATTRACTIONS

Europe is a multicultural, multi-currency mix, but not every country follows the same trends or growth pattern. The ten EU countries that joined in 2004 experienced much slower growth in 2006 than in 2005, and average room rates are some €24 behind the other EU countries.

Also, outstanding performances in key gateway cities such as London, Geneva and Moscow led to differences in occupancy levels and average room rates among those outside and inside the Eurozone. However, overall the hotel business across Europe was strong, showing a correlation between sport, business and culture and hotel profitability.

Big ticket sport always boosts international arrivals, enabling cities to fill hotel rooms during the tournament and make a sufficiently good impression that people will want to return – and encourage their friends and family to do the same. During the 2006 Winter Olympics in February, revPAR in Turin’s hotels increased by 191%, reaching €176 – bypassing established Italian favourites Rome and Venice for the first time.

Far-sighted investment ahead of the Games gave the city a €90m upgraded airport, the most advanced underground system in the country and a generous supply of high-quality hotel accommodation. All this has put Turin in a stronger position to attract leisure and business travellers in the future – in 2008, the city will host the World Architecture Congress, and will also be acknowledged as the World Design Capital.

The natural link between world-class sport and hotel business was further underlined in Spain, when Valencia welcomed an international fleet for the America’s Cup in June. The sailing crews’ entourage, sponsors, sailing enthusiasts and the media, helped fill hotel rooms and push up revPAR by 15.7% in 2006.

HITTING THE TARGET

For football fans, the place to be in 2006 was Germany, which hosted the World Cup. More than two million fans visited Germany for 64 matches in 12 cities, with extra flights laid on to meet demand. A former military base was turned into a dedicated World Cup terminal at Frankfurt, and many hotels put staff through rigorous training programmes to prepare them for the particular needs of international visitors.

The whole country joined in the spirit of the occasion, with large TV screens erected in squares, enabling those who couldn’t get tickets to watch the matches live. All of this helped present a welcoming and positive image to the world’s media.

RevPAR across Germany went up by 38% during June, the month of the World Cup. The big winner, however, was Berlin, which hosted the final. The city was fully booked on this memorable night, and data from Daily HotelBenchmark showed that revPAR soared 1,000% to €283.

Overall, Germany had a record year in 2006, posting double-digit increases for the first time since 2000. World Cup fever, combined with a more robust economic performance, saw Germany finish the year with revPAR up 10.7% at €55. The legacy of such a successful World Cup should be a continuing influx of international visitors, altering the dynamics of the country’s tourism industry, which has traditionally relied on domestic travel.

The UK hopes to emulate some of Germany’s success this July when London stages The Tour de France – Le Grand Depart, with a spectacular race past some of the city’s most famous landmarks, such as Buckingham Palace, before competitors set off through the Kent countryside on the first leg of the tour.

Tourism agencies know how a big event gives the hosts a chance to showcase what they have to offer. This event will attract thousands of cyclists and Tour de France supporters, as well as the world’s press and TV cameras. As the UK builds up the necessary infrastructure for the Olympics in 2012, this key fixture will present an opportunity for a well-managed rehearsal, which could also attract more world-class cultural and sporting events.

THE ART OF TRAVEL

One of the reasons for Europe’s enduring popularity is the richness and variety of its culture, particularly in music and the arts. During 2006 there were several good examples of how an important cultural event leads to a corresponding jump in hotel performance.

In Austria, for instance, the 250th anniversary of Mozart’s birth attracted tourists to Salzburg for a varied programme of festivities, pushing up revPAR by almost 25% in 2006. Thousands of tourists visited Amsterdam for the 400th anniversary of the birth of Rembrandt, giving the city exceptionally high occupancy levels. Also, Madrid and other Spanish cities laid on special exhibitions to mark the 125th anniversary of the birth of Picasso.

Conferences also continued to pull in the crowds. The European Seafood Fair in Brussels drew an extra 16,000 visitors and filled the city’s hotels, pushing average room rates up 127% to €250 on 9 May 2006, the opening day of the fair.

ROOM FOR GROWTH

Developing economies and a flourishing commercial sector are always good for business. Last year, all industries – especially the IT sector – expanded rapidly across Russia, where corporate demand for rooms is enabling hoteliers to maximise profits.

Room rates in Moscow increased by 18% as the city replaces its massive Soviet hotels with modern international chains. In 2006, InterContinental Hotels Group opened the 523-room Holiday Inn Moscow Sokolniki and Ritz Carlton will make its debut in June 2007 with a 334-room hotel.

London, where business confidence is high, saw a spurt in hotel growth in 2006, with several new hotels opening for business and multimillion-pound refurbishments of some old favourites, including the 282-room Hilton London Canary Wharf, the 245-room Hilton London Tower Bridge. Well-known hotels undergoing major renovations included Grosvenor House, the InterContinental London Hyde Park, which re-opened in November 2006 as the InterContinental London Park Lane and the Radisson Edwardian Mayfair.

The UK will experience a new hotel design concept – the small guestroom. YOTEL, inspired by a combination of a Japanese capsule room and a BA first-class cabin, will open at the country’s two main airports, Gatwick and Heathrow, this spring. Although snug, all rooms have en suite bathrooms and flat-screen TVs.

POLITICAL FACTORS

Not every European country shared the region’s good fortune during 2006. Hotels in Israel and Turkey faltered due to terrorist attacks and political conflict. However, the impact was short-lived as Istanbul, Jerusalem and Tel Aviv enjoyed revPAR increases of 7.3%, 8.0% and 3.8%, respectively.

Paradoxically, hotels sometimes actually gain from terrorism, as happened last summer in London during the chaotic aftermath of the foiled Heathrow bomb plot. Passengers stranded by cancelled flights intensified the demand for rooms at Heathrow and Gatwick hotels. This surge was brief and confined to a small number of hotels, so there was little to touch the UK’s overall performance.

A more significant development was the continuing expansion of the country’s low-cost carriers, whose cheap flights make visiting other European countries seem like a better deal. Whether the UK Government’s decision to introduce an environmental tax on these flights dampens the enthusiasm for interregional travel remains to be seen.

The outlook for the hotel market in 2007, both in Europe and the rest of the world, is good. People’s desire for new experiences, the increasing numbers of people in India and China planning trips abroad for the first time, and the growing popularity of emerging tourism destinations all point to a healthy tourism industry. Although global economic and tourism indicators suggest that performance may cool slightly this year, people are still keen to travel.