15 Sep, 2017
European City-hotels In 2017 and 2018
Almost all the cities are expected to see growth in 2017 and 2018. Strong demand has propelled some cities into the spotlight yet again while others have moved up or down the growth rankings.
In 2017 Porto leads the growth pack with almost 15% Rev PAR growth anticipated; Dublin could see 8.7% Rev PAR growth and further robust growth is expected in Budapest, Madrid, Lisbon, Prague and Barcelona. We expect recovery to kick off in Paris and growth to return to London, buoyed by a weak pound.
Standing out from the crowd
The positive economic and travel backdrop, together with a relatively benign supply backdrop, is anticipated to continue to drive further growth in 2017 and 2018. All the cities but two are projected to achieve growth in 2017 and all but one in 2018. It’s particularly impressive after a record 2015 and a pretty decent 2016.
What’s driving the growth?
The positive performances of these cities are due to a number of factors. First, performance reflects Europe’s position as a key destination and the continued demand from travellers to visit exceptional short break and holiday destinations to a safe environment.
This year hotels should benefit from rising US purchasing power abroad and London should see a short-term boost from the weak pound. Second, many of the cities are international business centers and despite economic uncertainty and political turbulence, corporate demand has also helped buoy up travel demand; this is particularly true of Frankfurt which has a busy Fairs cycle this year including the International Automobile Fair.
Third, events are a key driver of demand across many of the cities. The GSMA Mobile World Congress is in Barcelona — it is the world’s largest exhibition, conferencing and networking event for the mobile industry and attracted over 100,000 visitors in 2016. Other factors include improving destination accessibility as many cities add new routes and flights, as well as improving airport capacity. Constrained supply is also helping some, for example, a lack of new supply in Dublin is boosting ADR. Successful destinations recognize and offer travellers what they want and many are doing it very well. Some are focusing on promoting niche trends, for example, Barcelona’s medical tourism initiative, «Barcelona Medical Destination', is expected to attract more visitors. Berlin’s ‘365/24 Berlin' aims to catapult Berlin to reach its overnight visitor targets.
The highest growth is forecast for Porto, which could see a further 14.8% Rev PAR growth, on top of three years consecutive growth. Dublin is next up, with 8.7% Rev PAR growth, as demand for hotels in Dublin continue apace. 2016 marked double digit growth in Rev PAR for the third year in a row, primarily driven by a further increase in room rates. Budapest makes the top three with a 6.8% advance. Madrid, Lisbon, Prague and Barcelona all see strong growth, Frankfurt follows — the city has recorded growth since 2010. Paris and London return to growth after a disappointing 2016. Amsterdam, Berlin, Milan, Vienna and Rome see more moderate gains. The Swiss franc, although stable, remains strong and puts pressure on Geneva and Zurich’s performance and they are the only cities to show a decline.
We expect further growth in all but one city in 2018 (Zurich) as Budapest soars into second place with 9.9% growth. Porto still heads the rankings with 12.8% Rev PAR growth. Madrid doesn’t trail by far in third place with an 8.2% advance. Dublin slips to fourth place with 7.4% growth and Lisbon, Paris and Barcelona all see strong gains. Berlin and Frankfurt enjoy 3.1% and 3% growth apiece
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