Management and Strategy News
PwC Euro Hotel Forecast Anticipates Slower Growth in 2013
PwC's annual European Cities Hotel Forecast 2013 expects revenue per
available room (RevPAR) growth to slow in 2013 due largely to the
prolonged economic downturn. Nevertheless, some cities, such as St
Petersburg, Paris, Moscow and Frankfurt, are expected to demonstrate
robust RevPAR growth in 2013, with more modest increases expected in
Berlin and Dublin.
Featuring 19 of Europe's most important gateway cities, PwC's 2013
forecast provides a breakdown of revenue and occupancy forecasts,
opportunities driving tourism and investment in 2013 and the economic
outlook for each city. Collectively, the 19 centres of culture, finance
and commerce account for over 650,000 rooms and host over 85 million
annual international arrivals.
2013 Expectations 'Thrivers and Survivors'
Despite some notable performances exhibited in select cities in 2012,
the hotel industry faces a more challenging landscape in 2013 with
continuing economic issues likely to hold back growth. RevPAR growth is
expected to abate; no double digit gains are expected in any of the
cities surveyed. The report compares the 19 cities in terms of both
euros and in local currency, with some slight variations in results.
The forecast in terms of euro currency include: St Petersburg with
expected 7.3% RevPAR growth over 2013; followed by Moscow (5.2%) Paris
(5.0%) Frankfurt (3.5%), Berlin (3.2%) and Dublin (3.1%). In local
currency terms, Paris is the frontrunner with predicted 5.0% RevPAR
growth followed by St Petersburg (4.8%), Edinburgh (4.0%), Frankfurt,
Berlin and Dublin.
Many factors will affect all the cities including those expected to
record little or no RevPAR growth in 2013, and some cities, most notably
London and Madrid will see declines. For London, coming off an Olympic
high, this is to be expected but the city will still enjoy very high
absolute trading and profitability levels. For Madrid, by contrast, 2013
will be more about adopting strategies for survival, due largely to the
stagnant Spanish economy. In total, seven cities are expected to see
RevPAR (in euros) decline in 2013; London (-7.9%) is followed by Madrid
(-5.8%) Amsterdam (-3.2%), Zurich (-1.3%), Brussels (-1.2%), Rome
(-1.1%) and Geneva (-0.3%).
"A return to a steady state of economic growth is not likely in the
short term and the hotel industry has to adapt to this 'new normal' as
well as to new trends and challenges facing the sector", said Robert
Milburn, PwC's UK Hospitality & Leisure leader, "Our 2013 forecast
depends largely on how the eurozone crisis evolves. Though currently we
do expect steady growth in many cities, if the crisis escalates, we may
see even less promising results for the hotel industry."
A double dip recession and the continuing euro crisis had a significant
impact on the hotel sector in 2012. Influenced by the weakened economic
outlook, certain hotel markets (Amsterdam and Madrid) underperformed our
expectations, but some others (Dublin, Moscow and Barcelona), eclipsed
Average European hotel occupancy rates in 2012 showed a small decline
for the year to September, notably in Southern European destinations. By
contrast, a report from the European Travel Commission shows clear and
continued gains in some Eastern European countries. Four cities appear
likely to see double digit RevPAR growth in 2012: St Petersburg (14.1%),
Dublin (13.9%), Prague (13.1%) and Moscow (12.9%), with almost double
digit growth in Berlin (9.6%) and Paris (9.0%).
Industry Issues and Challenges
A myriad of factors have potential to affect the European hotel
industry. The eurozone crisis and overall economic instability
translates to challenges including lowered consumer confidence and
increased competition. Other issues and trends noted as concerns to
hotel industry leaders include:
changing consumer preferences;
the digital revolution how hotels' customers choose, compare prices,
book and share opinions about their travel experience is evolving
the impact of online aggregators on price and distribution;
gaining market share in a slow growth market where retaining existing
customers is crucial;
competition for BRIC tourists which continues on an upward trajectory.
"Hoteliers face a host of issues and challenges this year not just the
economic downturn but advances in how their customers use technology and
social media to evaluate and make purchases", said Liz Hall, PwC's Head
of Hospitality & Leisure Research, "Customer engagement will be crucial
marketing initiatives such as loyalty and reward programmes have the
potential to make a discernible difference."
This press release originally appeared on the
How Will You Measure Your Life? by 2013 Thinkers50 Award Winner Clayton M. Christensen