STR’s latest Global Hotel Study provides insights into the stability, strength and recovery of top European hotel markets.
LONDON—A study of European hotel market performance through the first half of 2019 shows continued strength in Berlin, Madrid and Malaga, and significant growth in markets such as Istanbul and Jerusalem, while Barcelona and Venice experienced declines.
The table below shows the top 10 European markets in terms of revenue per available room growth for the first six months of the year, compared to the same period in 2018. STR’s 2018 Global Hotel Study placed more than 100 markets across the globe into four categories: hot, up-and-coming, in recovery and in decline. What’s great to see is that all markets are represented in the top 10 markets for 2019, showcasing the changes that have already occurred across a number of markets so far this year.
(STR is the parent company of Hotel News Now.)
Hot markets that stayed hot
Hot markets in the Global Hotel Study are defined as established and stable markets, which achieve consistently high actual occupancy and ADR levels. Madrid, Malaga and Berlin are in this category, due to strong performance in 2018, as well as in the longer term.
Following a strong 2018, Madrid has had a stellar start to the year. In the first six months of 2019, hotels in the Spanish capital reported a 15.1% RevPAR uplift to €91.67 ($101.35), boosted by a 13.2% increase in average daily rate and a balance of leisure and corporate tourism. The city enjoyed a 45.1% RevPAR uplift in the month of June, driven by a series of key events such as the Champions League Final and 20th Annual European Congress of Rheumatology (EULAR).
Malaga has also achieved strong results so far in 2019, off the back of a robust 2018. RevPAR rose 8.3% to €82.04 ($91.70), a record for the market for the first six months of the year. Similar to Madrid, the market was largely boosted by a 7% ADR uplift. Occupancy was also on the up (+1.1%), with strong demand growth mitigating a 2.9% supply uplift. The market continues to benefit from an extended high season. Furthermore, market re-positioning has helped to boost performance, with greater demand coming in from higher-end customers with higher purchasing power thanks to a strong gastronomic and cultural offering.
In STR’s Global Hotel Study, we reported that Berlin’s hotel sector benefitted from Germany’s continued economic strength in 2018. Events also helped to boost performance, particularly in the second half of the year. This looks to have continued into 2019, with RevPAR up 7.1% as a result of increases in both occupancy and ADR. Berlin continues to be viewed as an attractive destination for international guests, as well as business and MICE segments. The market has also benefitted from muted supply growth so far this year, up 1.1% compared to the previous year. According to our latest forecast (May 2019), this is expected to ramp up in the coming year, up to 3% in 2020 and 3.9% in 2021.
Rate-driven boost for up-and-coming markets
Up-and-coming markets in the Global Hotel Study are defined as those that have achieved the highest year-over-year RevPAR, which is not connected with recovery. Jerusalem, Seville and Valencia sat within this category due to their strong growth levels in 2018, which appears to have continued into 2019.
It’s a story of rate-driven growth for our up-and-coming markets. Jerusalem saw an 18.8% RevPAR uplift in the first six months of 2019, boosted by a 15.3% increase in ADR, as well as a 3% increase in occupancy. Growth has been consistent in markets across Israel, with growth reported for Eilat (+11.0%) and Tel Aviv (+2.2%), as well as other regional markets. The country has benefitted from increased overnight tourist arrivals, up 14.1% in 2018, which is expected to increase by a further 4.3% in 2019, according to data from Oxford Economics.
The Global Hotel Study showed Valencia and Seville were benefitting from rising demand across Spain. This was attributed to a boost in the leisure segment, as well as growing MICE business, due to these markets being viewed as a more inexpensive destinations compared with other European markets. These growth levels have continued into 2019, with both Seville (+11.1%) and Valencia (+7.8%) reporting strong RevPAR uplifts. The markets largely saw ADR-driven growth, with Seville up by 7.8%, and Valencia reporting a 6.7% uplift. Both markets have achieved strong occupancy levels so far this year, exceeding 75% and reaching record levels for this period. As a result, hotels were likely more confident in increasing rates.
In the Global Hotel Study, recovery markets were defined as those affected by numerous factors that negatively impacted performance levels but are now starting to bounce back. These factors include supply growth, terror, economic factors, natural disasters and oil prices, among others. Istanbul and Brussels fell into this category in 2018, and it’s great to see that this recovery has continued into the first half of 2019.
Istanbul experienced a major downturn in 2015, stemming from multiple terror attacks, as well as a serious political conflict with Russia that resulted in a travel ban. There was a substantial recovery in demand in 2018, up 15.9%, which has continued into the first half of 2019, up 7.2%. Furthermore, supply has risen by 3% in both years, indicating that investor confidence is starting to turn around. Demand outpaced supply in both years, resulting in occupancy growing by 3.7% in the first six months of 2019, off the back of a double-digit increase in 2018. As a result, occupancy levels have reached 68.7% so far this year, the highest level achieved since 2013. ADR levels have seen significant growth levels, largely driven by the devaluation of the Turkish Lira. In the first half of 2019, ADR levels rose by 40.2% in local currency. However, this growth is just 1.3% (to $94.61) when looking in U.S. dollars. This is almost 60% below the city’s prior peak in USD in 2011, showcasing the fact that it has become a much cheaper destination for overseas visitors. This helps to explain the increase in demand now that it is viewed as a safe destination, and also the loss in revenues for overseas owners in Turkey.
In 2018, Brussels started to see sharp recovery following a series of terror attacks and related incidents in 2015 and 2016. In 2018, RevPAR saw double-digit growth, boosted by growth in both occupancy and ADR. This has continued at a slightly slower rate in the first half of 2019, with RevPAR up 6.9%, boosted by growth in both occupancy (+2.8%) and ADR (+4.0%). Brussels has benefitted from an increase in EU meetings held in the city due to Brexit negotiations, as well as muted supply increase, up by a marginal 0.1% so far this year. STR’s latest market forecast (May 2019) for Brussels shows this is set to pick up slightly in the coming years, with higher supply increases expected in 2020 (+1.4%) and 2021 (+3.4%).
Positive position for markets in decline
Markets in decline in the Global Hotel Study were those with the most significant RevPAR declines, currently being impacted by the same types of reasons listed for recovery markets, but which have yet to see the light at the end of tunnel. It is great to see that Barcelona and Venice are moving from a declining position in 2018 to recovery in the first half of 2019.
Venice has seen a healthy RevPAR boost so far this year, up 11.4%, driven by an 8.8% ADR uplift. In 2018, it was a story of overtourism for Venice, which resulted in protests from locals due to the impact it has had on their quality of life, as well as the environment. RevPAR commenced in March 2019, following double-digit declines in the first two months of the year. Peak growth levels were achieved in May and June, both seeing RevPAR growth in excess of 20%, largely thanks to events such as the Biennale Arte 2019, which commenced in May 2019 and will continue until November 2019.
In Barcelona, instability and protests as a result of the Catalan Referendum in October 2017 diminished performance levels for more than a year, resulting in a 4.7% RevPAR decline in 2018. Data from STR’s Profitability Programme shows that GOPPAR levels were also affected, with Barcelona reporting a 7.4% drop in 2018. Barcelona started to recover from this year of declines in the final months of 2018, and consistent RevPAR growth has been seen from October 2018 onward. In the first half of 2019, Barcelona reported a 12.7% RevPAR uplift, boosted by a number of key events in Q1, such as EAU, AEDV, SILACO-GEER and EAMHID Congresses. Looking ahead, STR’s market forecast shows Barcelona is expected to end on a high for 2019, finishing the year at just under 10% RevPAR uplift.
STR’s 2018 Global Hotel Study
With detailed insights for more than 100 global markets, the Global Hotel Study explores the highs, the lows and the factors tipping the scale in each direction of hotel performance. This report leverages expertise from STR executives located across 15 countries.
Natalie Weisz is senior manager of Research & Analysis at STR.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.