The glass-half-full outlook bodes well for Europe, although there remains a general malaise in southern countries, according to a panel at the Hotel Investment Conference Europe.
LONDON—A graphic on the cover of the program for the 2013 Hotel Investment Conference Europe shows a glass filled with water to the halfway point. The meaning is obvious: Is this an industry in which the glass is half full or half empty?
Speaking during a panel titled “Hotel and economic outlook in Europe,” David Goodger, director in Europe for Tourism Economics, an Oxford Economics Company, said a great deal of glass-half-full confidence is evident in Europe.
“When questioned, 63% of European hotel industry insiders said that the economy was trending up,” he said. “This is compared with those in China, only 25% of whom were confident, and in India, where the number was 35%.
“And regarding the question as to whether the number of hotel investment opportunities in the next 12 months will be greater than in the last 12 months, we also saw 70% of Europeans being somewhat confident, as opposed to those in the U.S. (48%) and India (43%). Topping the list was southeast Asia, where 52% of those questioned said they were very confident,” Goodger added.
Mark Clacy-Jones, head of indices at IPD Research, agreed. “Hotel performance has outperformed the real-estate market in all sectors—retail, industrial, all property and office—with the office market lagging the farthest behind.
“Certainly, hotels are becoming an increasingly important real-estate sector, with 2012 results being strong over all of Europe but mixed across individual countries,” he added. “Across classes, midrange and budget are outperforming luxury, although luxury is less volatile.”
“There is demand growth in Europe, but we are not seeing any lift when it comes to pricing,” said Elizabeth Winkle, managing director of STR Global, sister company of Hotel News Now. “(Revenue per available room) is back to where we were in 2008, but hotel costs have increased, and inflation also has gone up. It has taken us four years to get back to that RevPAR point, but we are €4 ($5.40) down from where we were in 2008.”
Winkle also said Europe has now sold more hotel rooms than ever since STR Global (including its earlier iteration as Deloitte and Benchmark) started gathering information in 1997. “We’re up 2.6% on a 12-month moving basis,” she added.
European hot spots, and otherwise
The hot spots of 2012, when listed in descending order, included: Germany, Turkey, United Kingdom, Russia and Poland.
According to the panel, the new top five hot spots in 2013 are Germany, U.K., Turkey, Poland and Russia.
“Hot spots for 2013 investment will be London, Paris and Berlin,” Goodger added.
“While London is the standout location with some very strong growth figures, growth there is expected to become more moderate by the end of 2013 and into 2014,” he said. “We see some bumps in U.K. performance, and the real strong story is the eurozone, which has emerged from recession.”
Throughout Europe and the eurozone, where confidence still remains lower than the panelists would like, there resides a weighted basket of positives and negatives. Indeed, they reflect that confidence, which Goodger claimed was at approximately 50%. The panelists listed the following:
- Positive: re-election of Angela Merkel in Germany.
- Negative: eurozone reliance on exports.
- Positive: strengthening of European competitiveness and a weakening of the euro against the dollar.
- Negative: stark disparity in the labor market, with some specific sectors in Athens showing unemployment close to 50%. Even if the economy is getting better in such places, any positive change will take a couple of years, with restlessness potentially leading politicians to pragmatically adapt sound economic policies.
- Positive: Tourism demand remains resilient, with international arrivals growing in 2012, certainly from emerging markets, and a rebounding of intra-European travel.
- Negative: continued divergence in credit availability across Europe, even though Spain, Italy, Greece, etc., are closing the gap with Germany. Southern European countries also have less access to the bond market and are, according to Goodger, only two or three years into what is generally termed the “Lost Decade.”
Despite southern European woes, Winkle said, said the region is the only in Europe to show pricing power—but that’s only because it’s coming from such a previously low base.
Across Europe, Winkle added, “There is a nice trending pattern emerging between the rise in gross domestic product and that of hotel demand, of which more is expected in 2014 and beyond, based on a stable environment and an increase in consumer confidence.”
“Hotels in France bettered the real-estate market quite considerably, although not as well as retail, while in the U.K. since 2008, we have seen stronger performance in hotels than in other property markets,” Clacy-Jones said. “In Germany, hotels again are doing better, although in Europe’s strongest economy, all property indices remained close to hotel sector performance.”