Munich hoteliers worry after Oktoberfest canceled
 
Munich hoteliers worry after Oktoberfest canceled
30 APRIL 2020 8:15 AM

The cancellation of Oktoberfest, held annually in Munich each September, is viewed as a bitter blow to the German city, not only for its contribution to hotel and city revenue but because what it could mean for events through the end of 2020.

MUNICH, Germany—The cancellation of Munich’s Oktoberfest due to the COVID-19 pandemic is a hard pill to swallow both economically and because it was a beacon of hope for Germany’s recovery beginning in 2020, according to sources.

This year, Oktoberfest was originally scheduled for 19 September to 4 October. The festival hasn’t been canceled since World War II, and since Oktoberfest started in 1810, the only cancellations due to health crises came from cholera outbreaks in Munich in 1854 and 1873.

Martin Kemmer, managing director of management and consultancy firm Place Value Hotel Management based in the Munich suburb of Unterföhring, said hoteliers had hoped Oktoberfest would not be canceled and that event demand would soften the performance declines expected throughout 2020.

“Absolutely nobody wanted it (to be canceled) or to admit it (might be), but for many, the Oktoberfest cancellation was the straw everybody was holding on to for hope there will be future (recovery),” he said.

Kemmer’s company manages three hotels in Munich: the 167-room Mercure Hotel Munich Ost/Messe, the 141-room Ibis Styles Munich Ost/Messe and the 68-room Comfort Hotel am Unterföhring. He said he is confident Munich will bounce back following the downturn.

Michael Patrick Struck, CEO and managing director and founder at Munich-based Ruby Hotels, which has eight properties including one in Munich, said the cancellation is the biggest blow yet in terms of economic recovery.

“The event is one of the strongest peak-demand events and factored into any Munich hoteliers’ business plan. … Clearly, however, the decision to cancel the event came as no surprise,” Struck said.

Frank Heller, regional director of Germany for Rocco Forte Hotels and GM of The Charles Hotel in Munich, said with Oktoberfest drawing approximately 6 million visitors, it became “clearer and clearer to me very quickly that we would have to do without our Oktoberfest this year. An implementation would be irresponsible and in no way sustainable.”

He said the Charles Hotel is one Munich hotel that has stayed open throughout the pandemic.

“We have deliberately decided against closing,” he said. “On the one hand, there are long-term guests who have already been staying with us for months or years, and on the other hand, we would like to use the time to make improvements and train staff to prepare for the new start after the crisis.

“Wherever possible, the employees work from the home office, and there is always a small team in the hotel to keep things running. Furthermore, we have a teaching assignment for our trainees, which we take very seriously and do not want to neglect.”

Ulf Templin, managing director of PKF Hotelexperts, said the decision to cancel Oktoberfest to help to stem the contagion was the right one.

“Of course it is a bad decision from an economic perspective,” Templin said. “This year, you can say, ‘Forget about it. It is a disaster.’ Next year? No one can say, but Munich’s mix of 50% business, 50% tourism helps.

“Munich will fare better than some other German cities, (with) probably two or three years to get back to last year’s numbers,” he added.

Big losses
Thomas Geppert, managing director of DEHOGA, the Bavarian Hotel & Restaurant Association, said the impact of losing Oktoberfest is significant.

“Oktoberfest is one of the most important events for the city’s hoteliers in general,” he said. “The cancellation of Oktoberfest means a loss of €1.3 billion ($1.4 billion), not only for Munich itself. Many industrial sectors are dependent on the hotel and restaurant industry, which is a main economic driving force.”

On average during Oktoberfest from 2015 to 2019, Munich hotels reported occupancy of 88.3%, an average daily rate of €219.55 ($238.80) and a revenue per available room of €194.05 ($211.06), according to data from STR, the parent company of Hotel News Now.

Natalie Weisz, STR’s senior manager of research and analysis, said on average RevPAR is 129% higher during event days versus the full year and that metric during event days is twice as high as full-year figures.

“On average, (Munich) hotels make €150 million ($163 million) in rooms revenue during event days,” Weisz said.

Hoteliers in the city are hopeful that another 2020 mega-event remains on the books in October. Expo Real, officially known as the International Trade Fair for Property and Investment and held annually at Munich’s largest convention center, is scheduled for 5-7 October.

Sources said there are discussions taking place that might save that event, but if it would also be canceled, development in all asset classes in the city and beyond would be significantly hampered.

“Tourism is the second pillar of business for Munich, but business is the other important pillar,” Templin said. “If we see Expo Real not take place, which starts immediately after Oktoberfest, supply and development will be slower than in the last years.”

He added that there still some hotels projects in progress in Munich, but all were launched before anyone had heard of coronavirus.

“I have heard of no new projects since,” Templin said.

Kemmer said there is a need to get the economy moving again.

“When people meet, there always is also the chance to build or to increase business,” he said. “The effects of these missed opportunities are invisible to any statistic, but they will have a real impact later on, (usually when) nobody can pinpoint why something is just not there.”

Kemmer added his company is still operating and he is confident he will not have to furlough employees.

Ruby Hotels’ Struck said few hotels in Munich that are operating are doing so in a very limited capacity. He added that if recovery is measured in a percentage of the budgeted profits, 2020’s cancellation will definitely hurt hotels into 2021 and perhaps beyond.

Geppert agreed, pointing to slow trickles of business travel demand.

“In Munich, quite a few hotels are still open, because of the fact that business travelers are still allowed to be hosted,” Geppert said. “

Employees not working in hotels were sent to the so called ‘Kurzarbeit’ (“short-time work”) ... an instrument in Germany, which is used to avoid job losses because of a temporary lack of work. It means that employees have to work less or even not at all, while getting money from the unemployment insurance.”

Visitors traveling for medical treatment or working in health care can also stay at hotels, and Heller’s Charles Hotel is one with current guests in that segment. Heller said the hotel industry must adapt.

“How quickly the industry recovers from this crisis does not depend on one single event, but on how we adapt to the new situation and respond to it with creative approaches,” he said. “We remain positive, look ahead and will continue to pamper and delight our guests.”

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