European Cities Hotel Forecast for 2017 and 2018
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www.pwc.com/hospitality Standing out from the crowd European cities hotel forecast for 2017 and 2018 March 2017 European cities hotel forecast 2017 and 2018 analyses past trading trends and provides econometric forecasts for 17 cities, all national or regional capitals of finance, commerce and culture. This year, we also look at how hotels should benefit from rising US purchasing power; whether hotels should consider refocusing on customers from periphery European economies and if rising oil prices mean higher air fares. In addition, where is the sharing economy heading in 2017? We share our top 10 predictions. Foreword 17% RevPAR increase; Dublin hotels Despite unprecedented levels of Standing out from also saw another great year with 16% geo-political uncertainty, tourism has the crowd in 2017 RevPAR growth. At the other end of proved resilient. The cities we project the spectrum, Paris, Brussels and to stand out in revenue growth terms in 2016 was a mixed year for hotels in Istanbul’s tourism industries were 2017 are Porto, Dublin and Budapest; Europe as safety and security concerns badly hurt by the lingering effects of but Madrid, Lisbon, Prague and impacted some destinations. In the end, past terrorism attacks. Barcelona should also see good growth. tourism proved resilient: 12 million In 2017 we are forecasting growth in Paris and London are projected to more tourists visited Europe than in the the majority of the 17 cities in this return to growth. Many destinations record breaking 2015 and more than report driven by continued economic have invested in improving and 2.8 billion nights were spent in tourist growth. The bulk of the hotel markets promoting the quality of their tourism accommodation in the EU alone. we analyse are part of the Eurozone, offering and are reaping the benefits. Some Mediterranean destinations where our latest projection is that GDP Looking ahead, Paris has entered the flourished: Spain recorded will grow by 1.5% and 1.6% in 2017 final stage of bidding (with Los 75.3 million visitors and Barcelona’s and 2018 respectively. There will be Angeles) to hold the Summer Olympic hotels saw 11% RevPAR growth; stronger growth within the peripheral Games in 2024 – a decision will be Portugal enjoyed bumper numbers and Eurozone economies too (Portugal, made in September 2017. Porto hoteliers saw a mammoth Spain, Greece and Ireland) which will European hotel deal activity reduced fuel demand for holidays. by nearly 10% to c. €19bn in 2016 – still Growth in the US is also projected to the second highest level ever recorded. pick up steam this year, and combined We forecast similar levels of European with a rising dollar may mean we hotel investment activity in 2017. see increased numbers of US tourists flocking to Europe. Travel demand from further afield should also David Trunkfield support hotels. Partner and UK Hospitality & Leisure Leader PwC UK Nicolas Mayer Partner and Industry Leader – Lodging & Tourism Clients PwC Switzerland European cities hotel forecast for 2017 and 2018 1 2 Standing out from the crowd Contents Summary 4 How did 2016 turn out for hotel markets? 6 Economic, travel and supply outlook 8 Feature: three key economic predictions for 2017 10 Travel and supply outlook: 13 Feature: where is the sharing economy heading in 2017 16 – we share 10 predictions Standing out from the crowd: spotlight on prospects 18 for 2017 and 2018 Which cities will be the most expensive, the fullest 21 and have the highest RevPAR? Deal talk 26 The European Cities Forecasts 30 From Amsterdam to Zurich: which cities are best placed to grow? Methodology 54 Further reading 55 Contacts 56 European cities hotel forecast for 2017 and 2018 3 Summary Analyses and forecasts for hotels for key cities at the heart of Europe The 6th edition of The cities surveyed For 2017, the economic In this snapshot (taken in February backdrop is positive PwC’s European 2017) we look forward to what 2017 Our latest projection is that GDP in and 2018 may hold for hotels in key the Eurozone will grow by 1.5% and cities hotel forecast European cities and which are best 1.6% in 2017 and 2018 respectively. placed to grow. There are 17 cities in Growth in the US is also projected to looks at the outlook this econometric forecast, all are pick up steam this year, and combined important gateway cities and/or with a rising dollar, we may see for hotel trading in business and tourism centres and increased numbers of US tourists some, such as London and Paris, are flocking to Europe. key cities in Europe, already mega cities. Travel set against a How did 2016 turn out? Europe recorded 12 million more Following a bumper travel year in tourists in 2016 than in 2015 – making backdrop of 2015, we expected it to get tougher in a total of 620 million international 2016 but by and large it was another arrivals – despite safety and security economic and travel good year and there were more than concerns. Some markets, like Spain 2.8 billion tourist nights in tourist and Portugal enjoyed an excellent year. growth but accommodation in the EU. For 2017, the UNWTO forecasts a Some cities prospered including: further 2-3% growth. Travel and hotels unprecedented Barcelona Budapest, Dublin, Lisbon, are expected to benefit from rising US levels of Madrid and Porto. Security concerns purchasing power abroad. marred the year for others such as Supply Paris, Brussels and Istanbul. geo‑political Overall, Europe is expected to continue Overall in 2016, the European hotel to see relatively low levels of new hotel uncertainty. industry saw RevPAR increase 2.1% supply growth despite some to €78.64, according to data from STR development hotspots such as Berlin Global. Travel and hotels have seen and London. Some cities have seven consecutive years of growth in introduced restrictive legislation to volume and RevPAR respectively, control new hotel development, since 2010. whereas others, like Dublin seek to increase tourism supply. Serviced accommodation and shared platforms continue to compete for travellers. More legislation and taxation is likely to regulate the shared economy. 4 Standing out from the crowd Porto, Dublin and Budapest Barcelona takes 3rd place in So what for deals? stand out from the crowd in occupancy rankings in 2018 European hotel deal activity reduced 2017 and Porto, Budapest and 6th place for RevPAR in by nearly 10% to c. €19bn in 2016 – still and Madrid in 2018 2017 and 2018 the second highest level ever recorded. The UK’s share of total transaction All the cities but two are projected to In absolute terms there’s no change in volume fell from c.60% in 2015 to only achieve growth in 2017 and all but one the top two occupancy rankings in 25% in 2016 reflecting investor in 2018. 2017 or 2018, with the highest uncertainty surrounding the Brexit occupancies forecast to be Dublin with vote. Meanwhile the “safe haven” of Only Porto is expected to see sustained 83% forecast in 2017 (driven by supply double digit RevPAR growth this year; Germany accounted for nearly 30% of shortages) and London 82% (despite transaction volume in 2016. We Dublin’s performance is outstanding high supply additions). But in 2018, following 16% RevPAR growth in 2016. forecast similar levels of European Barcelona takes third place (79.8%) as hotel investment activity in 2017. Budapest makes up the top three for Amsterdam slips to fourth. RevPAR growth in 2017. In 2017, the top six ADR rankings, Porto, Budapest and Madrid make the remain the same as in 2016, in absolute top three in 2018, as Dublin slips to terms, led by Geneva, Zurich, Paris, fourth place, despite 7.4% growth. In London , Rome and Barcelona. In 2018 2018 Porto sees sustained 12.8% Dublin pushes Barcelona into growth, followed by 9.9% in Budapest, seventh place. as Madrid moves into third place in the In terms of RevPAR levels, Geneva, growth chart, with 8.2%. RevPAR Zurich, Paris, London and Dublin take growth forecast Dublin is not far behind. the top rankings but a newcomer, Barcelona takes sixth place in both 2017 and 2018. European cities hotel forecast for 2017 and 2018 5 Recap: how did 2016 turn out for hotel markets? Following a bumper travel year in 2015, we expected it to get tougher in 2016 but by and large it was another solid year. Some cities prospered including: Barcelona, Budapest, Dublin, Lisbon, Madrid and Porto. Security concerns marred the year for others such as Paris, Brussels and Istanbul. 6 Standing out from the crowd Overall in 2016, the European hotel industry saw RevPAR increase 2.1% to €78.64, according to data from STR Global. Seven years of growth since 2010. 2.8 billion tourist nights in Hotel RevPAR saw a We underestimated the scale of EU in 2016 2.1% gain Barcelona’s 10.7% growth. In Dublin In 2016, the number of nights spent In addition relatively low new supply too we thought our forecast was bullish (for business or leisure) in tourist growth also helped hotels deliver some at 9.1% forecast RevPAR growth but accommodation establishments in the solid results. Hotel data supplied by a the city actually saw RevPAR rise European Union (EU) is expected to sample of hoteliers to STR Global by 16.1%. have reached more than 2.8 billion, up shows that in terms of trading, Porto surprised with 17% RevPAR by 2.0% compared with 2015, European occupancy was up around growth; Milan didn’t do as badly as according to data from Eurostat.