hospitality growth forecast to slow
A decade-long boom in hotel investment in Europe may be at its peak, according to Andreas Scriven, Deloitte UK lead partner for hospitality and leisure. Scriven said: “We’re at the top of the
cycle or in slight decline in Europe in a number of markets – earnings results confirm that. Different markets are trading slightly differently. “The UK leads the way as usual in hospitality. We’ve seen a slowdown in the UK regions, yet the cost base has continued to increase. You have business rates, the rising costs of food and beverage, the increase in the UK national minimum wage and the apprenticeship levy. We start to see some pressure especially on hotel businesses that are aggressively structured. “In Germany, there is concern that
growth is coming down. Secondary city markets there are seeing hotel supply increases of 15%, 20% or 25% in the next two to three years but don’t have the depth of demand of London or Paris and are hugely dependent on conference and exhibition business. There is a degree of volatility in how investors view the European hotel market. The UK and Ireland are at the top of the cycle or post-peak. There is a question mark over Germany. The Mediterranean market has some room to grow. Investors see opportunities in Italy and Portugal.”
%
20 40 60 80
0 32 Travel Weekly Insight Report 2019-20 Hotels in UK 67% 59% 47%45% 41% 39% 26% 7% % 24% 10% 0
20 40 60 80
Hotel supply
outstrips demand in leading markets, while UK’s biggest concern is filling entry-level roles post-Brexit
That view was confirmed by Robin Rossman, managing director of hospitality industry analyst STR, who told the European Hotel Industry Conference in London in November: “Demand growth is less than supply growth in many markets.” STR recorded a sharp fall in revenue
per available room (RevPAR) in the Spanish islands of Majorca and the Canaries. RevPAR reflects the average daily room rate and occupancy. It had fallen 6% year on year in Palma, 4% in Tenerife and Gran Canaria and 11% in Fuerteventura. Scriven added: “The recent travel collapses are a major issue for the whole Mediterranean, especially for independent hoteliers. There is significant exposure among family-owned, independent hotels in Spain, Greece and Turkey.” Of Turkey, he said: “The market fell off a cliff [in 2016]. Turkey has clawed its way back, but there is still a legacy and the collapses are not helpful.”
THE STATE of the economy has replaced Brexit as the
chief concern among UK hotel investors, with the shortage
of skilled labour also a leading concern (Figure 49)
BREXIT’S IMPACT Yet despite the possible stall in growth and uncertainty around Brexit, Scriven noted: “London has remained robust. There is not the same amount of Chinese capital [flowing into London] as three to four years ago, but that is more to do with macroeconomic factors. It has little to do with Brexit. London will remain one of the most-attractive places to invest in a hotel.”
FIGURE 49: TOP-5 RISKS TO HOTEL INDUSTRY IN NEXT FIVE YEARS Hotels in Europe
66%
Lack of economic growth Brexit
38% 22% 25% 21% 21% 19% 21% 17% 14%
Skilled labour shortage Weaker currency Political tension Break-up of EU
Resentment of tourists Competition from new entrants
2019 2018
Source: Deloitte European Hotel
Industry Conference survey, November 2019
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