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29 Nov, 2017

Frankfurt: One Of The Best Place To Grow

Frankfurt: One Of The Best Place To Grow

As Germany’s financial and business center, Frankfurt’s hotel market is expected to benefit from the country’s economic growth as well as recovering Eurozone countries into 2017 and 2018. The 2017 International Automobile Fair (IAA) show is also expected to drive 2017 to a stronger growth rate.

Role

Frankfurt and the Rhine-Main area are economic top-performers in the German and international economic landscape. Frankfurt is the financial center of Germany. Tourism in Frankfurt is dominated by business travellers and as such, demand for hotel rooms is especially strong during the week and outside vacation periods.

With the fourth biggest European airport, Frankfurt was able to serve more than 60 million passengers in 2016. The city also hosts international fairs and several other important events every year.

Historical trading

In 2016 the occupancy rate remained flat at 69.8% compared to the previous year. ADR decreased by 1.7% and reached €124 overall in 2016 (in 2015 it had been €126). As a result, RevPAR was down by around 2% y-o-y. It reached €86 in 2016 compared to €88 in 2015. Overall 2016 remained a good year for Frankfurt’s hotel market and RevPAR surpassed the 10-year-average by 13%. This represented the second highest value since 2001 — after 2015.

Supply trends

Frankfurt’s hotel capacity amounted to 46,400 hotel beds in 2016; these were spread over 249 hotels. The pipeline for the next few years is encouraging. In total, at least 17 hotels are expected to enter the market up till 2018 and will add some 3,500 rooms to Frankfurt’s hotel supply. The projects range from budget to upscale properties.

Marriott’s Moxy brand will enter the Frankfurt hotel market with three new properties with a total of 782 rooms. Steigenberger will launch an upscale hotel near the main train station. In the eastern part of the Europaviertel Holiday Inn Express Frankfurt will add another 162 rooms and is thus expected to further increase competition in the area. The Soluxe Hotel, an upscale product, has been under construction since 2008; the date of opening is not yet scheduled.

Deals

The hotel property market for hotels at the Frankfurt Airport was very active in 2016: the «The Squaire» including the Hilton Frankfurt Airport and the Hilton Garden Inn was acquired by Blackstone, two other hotel projects at the Airport were sold to Hansa Invest and Union Investment.

Opportunities

2016 was a turbulent year for the European economy. So far the German market has been spared any serious negative impacts of the Brexit vote. Several international banks have already confirmed their plans to move operations (partially) to different cities and Frankfurt is expected to benefit from these moves.

A further important pillar of Frankfurt’s hotel industry is the fair trade. For 2017 a total of 31 fairs is scheduled. The biggest fair will be the International Automobile Fair in September. This will support occupancy and ADR trading.

Finally, the low-cost carrier Ryanair will start to use Frankfurt airport instead of Frankfurt-Hahn (120 km east of Frankfurt) and this move could further stimulate the hotel industry in Frankfurt.

2017−2018 forecast

The German economy grew by 1.7% in 2016, largely due to low oil prices, low interest rates and low inflation which drove private consumption and outweighed the decline in external demand from emerging markets. In 2017 and 2018, the economy is forecast to continue to grow, albeit more slowly, by 1.4% and 1.5% respectively. The lower growth is driven by the rebound in inflation and energy prices. Unemployment is expected to remain at historic lows in 2017 and 2018.

Following strong growth in 2015, driven by the IAA show, Frankfurt experienced a decline of -1.6% in RevPAR in 2016 although ADR and occupancy rates remained at record highs. As Germany’s financial and business center, Frankfurt’s hotel market is expected to benefit from the country’s economic growth as well as recovering Eurozone countries into 2017 and 2018, with the 2017 IAA show also expected to drive 2017 to a stronger growth rate.

Read also: Emerging Trends in Real Estate in Europe 2017 and beyond, European City-hotels In 2017 and 2018, European Hotel M&A Trends for 2017, European Hotel M&A Activity in 2016

Know more about best places to grow: Amsterdam, Barcelona, Berlin, Budapest, Dublin, Milan, Lisbon, Madrid, Frankfurt

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