outlook 2015_rategain ITB Berlin


What’s your outlook for your hotel in 2015?

With ITB Berlin around the corner, we thought we would share a few interesting trends about the hospitality industry in Europe, and what you should look forward to in 2015.

Let’s begin with 2014

Looking at STR Global’s data for European hotels in 2014 (source: hotelnewsnow), we see a lot of encouraging figures.

In year-end 2014, Europe witnessed a total demand of 1.1 million rooms sold, one of the highest in a decade.

Elizabeth Winkle, managing director of STR Global commented that Europe has experienced an annual growth of 20 million international arrivals every year for the past four years.

Notable Figures

In December 2014, Budapest, Hungary enjoyed the largest occupancy growth by 21.3% to 60.5%.

During the same period, Tel Aviv, Israel reported the highest decrease in occupancy, by 5% to 59.1%. However, it was also one of the only 3 cities to report double-digit ADR increases – by 14.1% to EUR178.71, the 2 others being Manchester and London, UK. On the other hand Moscow, Russia reported a decrease of 35% to EUR83.7, the only instance of a double digit fall.

What about Germany?

Occupancy rose by 5.7% to 62.4%
ADR rose by 2.8% to EUR91.07
RevPAR rose by 8.7% to EUR56.8

The Continent as a whole

Year-on-year 2014 numbers for Europe (in EUR) is as follows…

  • Occupancy was 68.8% increasing by 2.1%
  • ADR was EUR106.09, a growth of 3.6%
  • RevPAR was EUR73.03, a growth of 5.8%

It’s encouraging to see RevPAR growth driven by ADR as well. 2013 had witnessed only 0.9% growth, which was driven by occupancy.

With these positive numbers in mind, let’s look at a few recent forecasts for the economy and the industry in 2015.

The European Commission’s Revised Outlook

If you haven’t heard already, the European Commission recently released revised GDP forecasts for 2015 for the European Union.

Growth for the EU as a whole is forecasted at 1.7% in 2015 (was 1.3% in 2014). For the 19 countries sharing the Euro, GDP growth is now forecasted at 1.3% (was 0.8% in 2014), up from the earlier forecast of 1.1%. The EU’s biggest economy, Germany is projected to grow by 1.5% (same as 2014).

These numbers look encouraging, don’t they?

The good news continues in 2016. GDP growth in 2016 is expected to be 2.1% for the EU and 1.9% for the Euro Zone.

But here’s the best part:
For the first time since 2008, GDP is expected to grow in every country in the European Union.

What’s behind this?

What are the drivers for these revised forecasts?

The European Commission credits the projected improvement to cheaper oil prices, a weaker Euro and recent European Central Bank measures.

The ECB recently launched a program to purchase EUR60 billion of bonds every month. Combined with the growth in exports that a weaker euro brings and the trickle-down effect in all sectors of the economy, the ECB measure is expected to inject significant momentum into the economy.

What about Hospitality?

A revised GDP projection is great for the economy as a whole, but what about the hospitality sector?

All this is great news for travelers and of course – hotels!

Leaving the trickle down effects aside, cheaper oil means cheaper travel costs, and a weaker Euro means more attractive room rates for guests from outside the Euro Zone.

The United Nations World Tourism Organization Numbers

We will talk about projections for the hospitality sector in a minute, but let’s take a quick look at what happened last year.

The World Tourism Organization, also known as UNWTO, a United Nations body, released a report last week. This report contained figures for 2014 as well as projections for 2015.

According to the report, in 2014 the number of international tourists (overnight visitors) reached 1.138 billion globally. That’s 51 million more tourists than in 2013 translating to a growth of 4.7%.

Since the 2009 economic crisis, the sector has now witnessed 5 consecutive years of above average growth.

What about Europe?

Europe, the globe’s most visited region attracting over half of the world’s international tourists, witnessed a growth of 4%.

That’s an increase of 22 million visitors reaching a total of 588 million.

In fact, tourism is considered to be a major contributor to the European economic recovery.

At the Spain Global Tourism Forum in Madrid, UNWTO Secretary-General, Taleb Rifai commented that,

“Over the past years, tourism has proven to be a surprisingly strong and resilient economic activity and a fundamental contributor to the economic recovery by generating billions of dollars in exports and creating millions of jobs. This has been true for destinations all around the world, but particularly for Europe, as the region struggles to consolidate its way out of one of the worst economic periods in its history,”

Let’s look at the growth percentages by region…

  • Northern Europe: +7%
  • Southern and Mediterranean Europe: +7%
  • Western Europe: +2%.
  • Central and Eastern Europe: 0% (after three years of strong growth)

 What about receipts?

In 2013, global international tourism receipts stood at US$ 1,197 billion.

An ONWTO press release stated that “As in recent years, the growth in international tourism receipts in 2014 is expected to have followed that of arrivals fairly close.” The 2014 receipts figures will be released in April 2015.

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Back to 2015

For 2015, UNWTO forecasts international tourist arrivals to grow between 3% and 4% in Europe.

Growth in the Americas and Asia & the Pacific is projected to be slightly higher at 4 – 5%

UNWTO Secretary-General, Taleb Rifai attributed the positive outlook to falling oil prices which are boosting purchasing power and private demand in oil importing countries.

However, the same factor would might adversely affect purchasing power in some oil exporting nations which have been source markets for tourism.

The Russian Impact

One of those source markets is Russia where the falling rouble has severely eroded purchasing power. Various hoteliers from Turkey, France, Austria, Germany, Cyprus and England have shared their concerns about the loss of tourists from Russia. (source: fox news )

Oberbayern, a region in Bavaria, Germany, experienced a drop of 4.5% in the number of Russian visitors in the January to September period (vs. 2013), according Bayerische Rundschau TV.

If your hotel has historically had a significant percentage of Russian guests, you should initiate marketing activities targeted at other regions.

The Overall Numbers

It’s important to note that the UNWTO forecast of 3-4% growth in Europe is attractive despite the drop in visitors from Russia.

This positive outlook for 2015 is confirmed by the UNWTO Confidence Index. 300 tourism experts from across the world have been consulted for arriving at the index.

Overall, we believe that the trend looks promising!

Let’s discuss more

RevPAR growth, GDP projections and tourist arrivals all indicate a sunny 2015.

Have questions on:

  • What all this means for your hotel?
  • How can your revenue managers make the most of the growth and make more revenue everyday?

The RateGain Team will be at ITB Berlin from the 4th to the 6th of March 2015. Join us there for a conversation at Hall 8.1, Stall 115.