While plenty of coastal hotels are hoping for a second strong summer of staycation demand, complete recovery of the hotel market at large could take several summers.
A recent assessment by CBRE suggests it will not be until 2024 that the European hotel market fully returns to pre-covid levels of business. “Markets and hotels are unlikely to recover in a uniform manner,” warns Owen Pritchard, COO of CBRE Hotels EMEA, in the group’s latest regional market update.
Markets are now clear that leisure will return ahead of business demand, and that therefore accommodation in leisure-oriented locations will benefit earliest. What is also clear is that, with short term issues around international travel, those markets that are largely self-sufficient – with domestic demand strongest – will fare best.
But CBRE says property condition, technological innovation, management and new hotel supply will all play their part in defining the slope of recovery graphs. In the short term, “we expect uneven operational performance recovery”, warn the agents, with operational structures adapting to the changing business environment.
Meanwhile, the opening of international travel corridors will be critical to the return of business in those markets particularly reliant on foreign tourists. And, as pressure group UKinbound points out, the reopening of international travel needs to acknowledge reciprocity, otherwise there is a danger of losing staycation business, without a commensurate benefit from inbound visitors.
UKinbound CEO Joss Croft commented: “As soon as our borders reopen Brits will head abroad on holiday, which will see domestic demand for UK hotels reduce. For hotels to begin their full recovery we need international visitors to return, which is why it’s imperative that government ensures fluid, cost-effective, easy access to the UK for inbound visitors from green countries. Inbound tourism was the first sector to be affected by the pandemic and will be the last to recover. As long as government puts in place barriers at our borders it needs to provide additional financial support.”
Around Europe, markets will revive at varying speeds, depending on the mix of local vs international leisure demand, as well as the expected pipeline of new openings. While some developments have been substantially delayed, and others held up by covid-related working issues, there is already an overhang of new hotels previously destined to open in 2020; many of these are now coming into key markets around the continent.
Germany is one of the markets expected to return first. Demand is largely domestic, with just 18% of overnight stays in 2019 being international guests. CBRE recorded occupancy down to 32% in 2020, while ADR fell 13% and revpar decreased more than 60%.
“The large share of domestic tourism, paired with a trend towards ground-based, ceo-friendly and decelerated travelling will benefit a comparably quick recovery of the market,” said senior consultant Helena Rickmers.
And the Netherlands, too, is expected to recover quickly. The country recorded 54.8m overnight stays in 2019, which more than halved in 2020. “What remains unchanged is the long term fundamentals of the local hotel market, which benefits from robust demand drivers, a strong economy and a relatively stable political climate,” said CBRE’s Reza Mokarram.
Spain hit a record 342.9 million overnight stays in 2019, according to figures collated by CBRE, a figure that tumbled 72.9% last year. Heavily reliant on inbound business, authorities are pushing hard to open–up their market to northern European source markets for the summer holiday season.
In France, the country’s impressive 2019 figure of 215m overnight stays represented a strong bounce back from its previous upset with terrorist attacks in 2016. The figure for 2020 fell to 90m as overseas visitor numbers fell, with the greatest reductions in Paris and on the French Riviera. Occupancy fell to an average 32.5% for 2020. CBRE expects Paris to return strongly, as it has before, and notes that a strong pipeline of big events in the city should help.
Italian hotels, with a strong inbound presence from US and Russian tourists, also suffered in 2019, though domestic demand from June to September was reckoned to be down just 14% year on year. The market continues to be a target for international brands seeking a presence in a landscape where just 10% of rooms have international flags.
The Czech Republic relies heavily on international visitors, with the market in the capital Prague particularly exposed. Having consistently performed well in the five years to 2019, when it registered 18.5 million overnight stays, last year saw a 75% decline in numbers, with revpar down 85.2%. A strong pipeline also has more than 1,600 rooms scheduled to arrive into the market next year. With a reliance on foreign visitors, it is expected to take until 2024 for the market to recover.
And back in the UK, a patchy recovery that will favour leisure destinations leads CBRE to expect a full market return only by 2024. “Many of our hotel members with properties in rural, countryside and coastal locations are reporting strong domestic bookings, however the picture is very different for city hotels, which are much more reliant on international visitors,” said UKinbound’s Croft. “Inbound tourists are incredibly valuable to the UK’s hotel industry.”
HA Perspective [by Andrew Sangster]: Hmmm. There seems a lot of pessimism about. The UK hotel sector ought to be in ebullient form. The net balance for inbound versus outbound is a positive 50 million or so, about as big as the existing domestic tourism economy. A 100% increase in demand should put a smile on even the most curmudgeonly hotelier.
Even if you believe business travel will rebound slowly (see our other story this week to cheer you up) and that European travel will still take many Brits abroad, a bumper tourism season is still in prospect.
There is much that can still go wrong. Vaccine-resistant new variants are probably at the top of the list. But the bigger risks, in my view, lie on the upside. Missing out on once-in-a-generation opportunities to grow fast should be the biggest fear.