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Home , Shroud of Turin, Turin metropolitan area

OCTOBER 2014 | PRICE €400

IN FOCUS: ,

Ezio Poinelli Director

Pavlos Papadimitriou Senior Associate

Panagiotis Verykios Analyst

www.hvs.com HVS ATHENS | 17 Posidonos Ave. 5th Floor, 17455 Alimos, Athens, GREECE HVS | c/o Hemera Ventures, Blend Tower, Piazza 4 Novembre, 7, 20124 Milan, ITALY

This market snapshot presents current data and information on the hotel and tourism industry in Turin, Italy. In writing such articles we utilise the expertise of HVS for each market to the full extent combining our in-house data and research together with published information regarding each of the examined destinations. Highlights

• Italy is the third-largest economy in the euro-zone, but its exceptionally high public debt and structural impediments to growth have rendered it vulnerable to scrutiny by financial markets. Public debt has steadily increased since 2007, topping 133% of Gross Domestic Product (GDP) in 2013, but investor concerns regarding Italy and the broader euro- zone crisis eased in 2013, bringing down Italy's borrowing costs on sovereign government debt from its euro-era record levels;

• The government still faces pressure from investors and European partners to sustain its efforts to address Italy's long- standing structural impediments to growth, such as labour market inefficiencies and widespread tax evasion. In 2013 economic growth and labour market conditions deteriorated, with recession at 1.8% and unemployment rising to 12.4%. Italy's GDP is currently 8.0% below its 2007 level however, the short-term economic outlook seems more promising, eventually stabilised after a tumultuous period;

• According to the World Travel and Tourism Council, the total contribution of the Travel and Tourism (T&T) economy to the GDP of Italy was €159.6 billion (10.3% of total GDP) in 2013, and is forecasted to rise by 2.1% in 2014, and to rise by 2.0% per year to reach €198.2 billion (11.0% of GDP) in 2024. The Italian T&T economy is currently ranked 8th in absolute terms and 78th according to its relative contribution to the country’s GDP amongst 184 countries;

• The total contribution of the T&T to employment, including jobs indirectly supported by the industry, was 11.6% of total employment (2,619,000 jobs) in 2013. This is expected to rise by 1.3% in 2014 to 2,652,500 jobs and rise by 1.6% per year to reach 3,094,000 jobs in 2024 (13.4% of total);

• International tourism arrivals in Turin have recorded modest growth rates over the last four years after a period of fluctuation with a negative trend. However, the destination has recorded a very positive trend overall during the last decade. Airport arrivals from abroad recorded a deterioration of 3.5% over the 2011-13 period but have in general being increasing by an average rate of 1.1% per annum;

• After the 2006 Winter Olympics the city has achieved to reposition itself attracting a higher proportion of leisure travellers. Corporate segment has suffered the last few years, as in almost every European major city, but the 2015 Milan EXPO and the Exhibition of the Holy Shroud the same year are projected to stimulate lodging demand and instigate an on-going visitation trend in the city. Region Overview

Turin is an important business and cultural centre in northern Italy, capital of the region, located mainly on the left bank of the Po River, in front of and surrounded by the western Alpine arch. The population of the city is 911,823 (December 2012) while the population of the urban area is estimated by Eurostat to be 1.7 million inhabitants. Turin is ranked third in Italy, after Milan and Rome, in terms of economic strength. With a GDP of $58 billion, Turin is the world's 78th richest city in terms of purchasing power.

Turin is well known as the home of the Shroud of Turin, the headquarters of the automobile manufacturers FIAT, Lancia and Alfa Romeo, Iveco, the football teams Juventus F.C. and Turin F.C., and as host of the 2006 Winter Olympics. FIAT’s presence in the city is viewed as a demand driver in the business segment of the lodging industry in the city. The company’s imminent move of headquarters out of Turin to London, UK, for tax reasons, is expected to put pressure on the business segment, and could result in a decline in the market both in terms of supply and demand. On the other hand, the city has recently repositioned itself as a leisure destination as well, especially after the 2006 Winter Olympics. Hosting the Olympics brought an investment of €1.7 billion in infrastructure, such as the city’s metro and other sport facilities. The Olympics represented

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an opportunity to revamp the city's look LOCATION OF TURIN and change its traditional image as an industrial city by showing the world its side of vibrant cultural life and noteworthy architecture. Nowadays, thanks to the aforementioned exposure and the city, Turin has become one of the primary Italian tourist destinations and has been established as an important European sport centre. All this has signalled a move from targeting business segment travellers to attracting also leisure tourists.

Finally, two major events in 2015 are expected to generate additional room demand in the city of Turin. The 2015 Milano EXPO will take place at a location 35 minutes away from Turin by train, and individuals visiting the exhibition are in many cases expected to choose Turin over Milan in search of lower prices. The second event is the demonstration of the Shroud of Turin. The Holly Shroud will go on display in April 2015 for approximately two months. The Shroud is not on display regularly, and is considered one of the important holly of the . This second event is expected to boost the leisure market and target pilgrimages visiting the city both individually but also in organized .

Major Tourist Attractions in Turin

Turin already existed as a city in the Roman era and it is believed that by the time the Palatine Towers were built, the city had 5,000 inhabitants. Turin was under the control of the House of for a very long time, starting in the 11th century and ending with the abolition of Italian monarchy in 1946. By the time Turin was annexed to the Duchy of Savoy the city’s population was already 20,000 (mid-13th century), was named capital of the Duchy in 1563, while the city’s architecture developed in the Baroque style, still evident in its historic centre. The Residences of the Royal is a UNESCO World Heritage Site. Piazza Reale (Piazza San Carlo) and Via Nuova (Via Roma) were added with the first enlargement of the walls, while the Palazzo Reale (Royal Palace) was also built in the first half of the 17th century. In 1861 Turin was proclaimed the first capital of the Kingdom of Italy, a title that lasted for four years. During the late 19th century the city underwent rapid industrialization, with significant presence in the automotive sector (Fiat, 1899; Lancia, 1906).

The city features many historical and cultural tourist attractions like the and its adjacent Chapel of the Holy Shroud (home to the Shroud of Turin), , the Egyptian Museum, the Museum of the Risorgimento, and a considerable number of churches and palaces.

Besides all the above mentioned historical sites, Turin offers plenty of other choices that attract tourists. The exposure from the 2006 Winter Olympics, and the venues built for that purpose have made Turin one of the primary Italian tourist destinations and have established it as an important sport centre in Europe. The presence of Fiat cars, Ferrero chocolate, Lavazza coffee, and other large companies in and around the city are viewed as demand drivers in the business segment of the lodging industry in the city. Turin is a base for wine tourism activities in the area, since the entire region boasts numerous vineyards as well as being home to some of the most notable Italian wine and grape varieties (such as Moscato D’ Asti wines, or the Nebbiolo grapes).

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Tourism and Visitation

Airport Traffic

Turin Airport, also known as Turin - Caselle CHART 1: ARRIVALS BY AIR - TURIN 2003-13 (000s) Airport, is located at , 15 kilometres northwest of the city centre. 2,000 The airport is connected by rail to the city of 1,500 Turin by the Ferrovia Turin-Ceres, operated by GTT as line A of Turin metropolitan 1,000 railway service and by bus, by means of the SADEM bus shuttle and charter buses, and 500 Terravision buses. 0 Airport arrivals in the city of Turin have been 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 moderately increasing over the last 10-year International Domestic Total period. The Compound Annual Growth Rate Source: Eurostat (CAGR) for the period 2003-13 was 1.1% primarily driven by an increase in international visitation. Domestic travellers have been growing by a modest CAGR of 0.7% accounting though for approximately 60.0% of total arrivals by air. The total number of passengers arriving in 2013 grew by 11.6% when compared to the respective number for 2003.

CHART 2: HOTEL BEDNIGHTS - TURIN PROVINCE 2008-13 (000s) Visitation

7,000 Throughout the entire 2008-13 period the majority 6,000 of visitors to Turin Province referred to domestic 5,000 tourism, accounted almost every year for more than 4,000 75.0%. International visitation amounted for up to 3,000 25.1% of total accommodated bed nights in 2012; 2,000 however, they usually represent less than 20.0% of 1,000 the market. In 2013, hotel bed nights in the broader 0 2008 2009 2010 2011 2012 2013 city area recorded a very positive trend rising by International Domestic Source: Osservatorio Turistico Regionale di Regione Piemonte 12.0% after having shrinked by 20.6% in 2012. Generally, throughout the examined period the CHART 3: GENERAL VISITATION DATA AND INDICES - TURIN PROVINCE 2008-13 positive CAGR is primarily driven by the Arrivals at Accommodated Average Length Bed international visitation since the lower disposable Year Hotels (000s) Bednights (000s) of Stay (Days) Occupancy 2008 1,483 5,272 3.6 38.2 % income of Italian individuals and companies has 2009 1,913 5,509 2.9 38.8 negatively affected domestic tourism in the last 2010 1,968 5,775 2.9 40.7 couple of years. 2011 2,001 5,957 3.0 41.8 2012 2,018 5,515 2.7 38.4 Bed occupancy levels in the city’s hotels record 2013 2,053 5,937 2.9 41.3 healthy levels around 40.0% each year with no Source: I.Stat, Osservatorio Turistico Regionale di Regione Piemonte, HVS Analysis significant fluctuations since, as illustrated in the next session, the number of hotel beds is mostly stable. Together with bed occupancy, the average length of stay in the city remained also relatively steady during the last six years at approximately 3.0 days. The trends highlighted are once again explained by the fact that inbound tourism in Turin is heavily dependent on its extensive industrial facilities, and as such many domestic corporate executives visit the city for business purposes. Nevertheless, according to hotel executives in Turin, the leisure segment is experiencing significant growth after the 2006 Winter Olympics thus, lightening the city’s high dependency on business travellers.

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CHART 4: HOTEL ARRIVALS AND BEDNIGHTS - TURIN METROPOLITAN AREA Hotel arrivals and bed nights in the city of Turin and its 2004-13 (000s) metropolitan area represent approximately 62.0% and 4,500,000 72.0% of the data for the entire province, respectively 4,000,000 following the exact same pattern. Throughout the entire 3,500,000 2004-13 period both arrivals and bed nights in the city 3,000,000 of Turin have been steadily growing by strong CAGR of 2,500,000 6.2% and 4.5, respectively. Arrivals the city account for 2,000,000 approximately 75% of the total visitation in the entire 1,500,000 province revealing the significance of the urban area 1,000,000 which is the focal point for travellers visiting the region 500,000 regardless the purpose of the trip. 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CHART 5: VISITATION BY SOURCE COUNTRY - TURIN 2013 Arrivals Accommodated Bednights Source: Osservatorio Turistico Regionale di Regione Piemonte Our research shows that, apart from the domestic market, the primary source countries for international visitation to Turin are France, the United Kingdom, Germany, and Switzerland. 25.6% UK The economies of these countries experienced a positive 43.0% economic rebound in 2010 and beyond, following the initial Germany effects of the global economic crisis and the subsequent effects Switzerland 22.0% on their economies during 2009. The outlook for 2014 Russia indicates a projected acceleration in GDP growth, while the Others global economic uncertainty is still evident, although at a 8.8% smaller scale. From 2015 onwards, these economies are 4.7% 4.5% forecast to witness moderately positive growth rates despite the reservations sustained by investors over global economic Source: Osservatorio Turistico Regionale di Regione Piemonte conditions.

CHART 6: HOTEL SUPPLY - TURIN 2006-12 Hotel Supply % Share No of Hotels: 2006 2007 2008 2009 2010 2011 2012 (2012) Hotel supply shows a significant 5* Hotels 3 5 5 5 4 4 2 0.4% 4* Hotels 46 63 66 69 70 68 74 13.2% increase in 2007, due to the 2006 Winter 3* Hotels 219 244 257 264 264 262 265 47.2% Olympics that took place in Turin. Since Other 253 250 235 229 222 224 221 39.3% then, the total hotel supply in the city is Total: 521 562 563 567 560 558 562 100% kept stable at approximately 560 % Share No of Rooms: 2006 2007 2008 2009 2010 2011 2012 (2012) establishments featuring approximately 5* Rooms 244 605 787 787 525 525 191 1.0% 18,000 rooms and 39,000 beds. 4* Rooms 3,448 4,540 4,722 4,926 5,078 5,012 5,601 29.6% 3* Rooms 7,129 8,190 8,544 8,881 8,981 8,836 8,837 46.8% Overall, nearly half of Turin’s hotel room Other 4,506 4,573 4,337 4,309 4,239 4,436 4,266 22.6% supply is classified in the three-star Total: 15,327 17,908 18,390 18,903 18,823 18,809 18,895 100% category. The four- and five-star % Share No. of Beds: 2006 2007 2008 2009 2010 2011 2012 (2012) categories both add up to approximately 5* Beds 485 1,223 1,701 1,701 1,212 1,212 433 1.1% 30.0% of the total hotel room supply in 4* Beds 6,943 9,191 9,552 9,966 10,253 10,133 11,738 29.8% the city. Although five-and four-star 3* Beds 13,785 16,234 17,229 17,917 18,110 17,873 17,796 45.2% Other 8,856 9,212 9,331 9,356 9,265 9,824 9,406 23.9% establishments amount for less than Total: 30,069 35,860 37,813 38,940 38,840 39,042 39,373 100% 15.0% of Turin’s hotel supply they Hotel Supply Increase — 7.9% 0.2% 0.7% -1.2% -0.4% 0.7% account for more than 30.0% of the total Room Supply Increase — 16.8% 2.7% 2.8% -0.4% -0.1% 0.5% hotel room and bed supply because of Bed Supply Increase — 19.3% 5.4% 3.0% -0.3% 0.5% 0.8% their larger average size. More than 50% Source: I.Stat

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of room capacity is shared among establishments registered either as three-star or at lower classes. Throughout the period 2006-12 there has been a really modest growth in room and bed supply with a CAGR of 3.3% and 4.2%, respectively.

Branded Properties

The majority of the city’s properties flying an international brand flag are operated by NH Hotels, a Spanish-based company that, in order to penetrate the Italian market, took over Italy’s trademark Jolly Hotels chain in 2006. NH Hotels currently operate four properties in Turin totalling 706 rooms. Other major international management companies that have a presence in the area are Marriott (AC Hotel Torino), Intercontinental Hotels Group (Holiday Inn Turin City Centre and Holiday Inn Turin Corso Italia), Accor (Novotel Torino Corso Giulio Cesare and Mercure Torino Crystal Palace), and Best Western with six hotels under its flag. Other than the properties mentioned here, the city’s other hotels are independently owned and managed. Local management companies with a presence in the city include Starhotels (Majestic) and ATA Hotels (Principi di Piemonte). Hotel Performance Chart 7 summarises the important CHART 7: HOTEL PERFORMANCE - TURIN 2011-13 AND YTD JUNE 2014 operating characteristics of primary 140.0 100.0% hotels located in the city of Turin. The 90.0% 120.0 chart sets out the average occupancy, 80.0% 100.0 average room rate, and rooms revenue 70.0% 80.0 60.0%

per available room (RevPAR) for a sample )

€ 50.0% ( of five- and four-star properties hotel 60.0 40.0% properties in the city totalling 854 rooms. 40.0 30.0% 20.0% 20.0 The examined sample of hotels have 10.0% 0.0 0.0% experienced a strong increase in 2011 2012 2013 occupancy since 2011 while achieved ARR (€) RevPAR (€) Occupancy (%) average room charges were mainly Source: HVS Database stagnated for the last three years. This June 2013 YTD June 2014 YTD % Change was a result of hotel operators focusing more on volume rather than on average Occupancy (%) 60.8 64.6 6.3% ARR (€) 116.6 124.1 6.4% rates which were put under pressure RevPAR (€) 70.9 80.2 13.0% especially from the business segment. As a result of the occupancy and average rate Source: HVS Database dynamics, RevPAR was constantly increasing since 2011 reaching to €75 in 2013 showing a significantly increasing trend for the first semester of 2014 as well driven both by occupancy but also from the achieved average room rates (ARR).

It should be further noted that Turin maintains fairly constant levels of occupancy and average room rates throughout the course of the whole year, and is a destination not susceptible to extreme seasonality patterns. Recent and Forthcoming Tourism Developments and Events

The brand new NH Collection Torino Piazza Carlina hotel sits in the very heart of Turin within the premises of a historic building of the 17th century, once home to Antonio Gramsci, co-founder of the Communist Party of Italy. The hotel features 160 rooms and is expected to open within the next few months.

The owning company of Starhotel Majestic had the 112 out of the 161 rooms of the hotel totally renovated within 2013 at a reported cost of approximately €3.0 million.

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There are three major events which are expected to drive rooms demand in the city of Turin for 2015. The 2015 Milano Expo will take place at a location 35 minutes away from Turin by train, and individuals visiting the expo are in many cases expected to choose Turin over Milan in search of lower prices. The second event is the exhibition of the Shroud of Turin. The Holly Shroud will go, once again, on display in 2015. The Shroud is not on display regularly, and is considered one of the important holly relics of the Catholic Church. Finally, Turin will be the European Capital of Sports for 2015, hosting several sporting events throughout the course of the year. Conclusion

Our review of the various tourism related data indicates that Turin benefits from a sound economic climate, primarily driven by the automobile and food production industries, as well as the continuing repositioning of the city as a cultural and sports hub in the southern part of the Alps, and despite the Euro-wide uncertainty over the Union’s economic future. Most well- known tourist spots and attractions are the historical city-centre of Turin, the Savoy Residences, the various museums, as well as the wine-growing parts situated outside the city. However, five-star hotel properties represent a small proportion of the city’s hotel units, whereas there has not been any intensive hotel investment activity recorded in the recent past, beyond the 2006 Winter Olympics surge. The fact that only a limited number of lodging facilities are internationally branded sets the majority of the market unable to target more profitable niche market segments or charge higher room rates utilising the global distribution channels and the more sophisticated revenue management systems of such companies.

Turin can, under certain circumstances, provide ground for promising hotel investments, especially given that the market seems to be going through a phase of repositioning from a business-oriented destination to a more leisure-focused one. Year 2015 is expected to be very promising in terms of lodging demand. As mentioned earlier, the 2015 Milan EXPO will take place close to the city of Turin and the Shroud of Turin will also be put on display in spring 2015. On the other hand, if Fiat eventually proceeds with moving its headquarters, the business segment should relatively suffer from lower demand levels.

© HVS October 2014

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About HVS About the Authors

Ezio Poinelli is the Director HVS is the world’s leading consulting and services of the HVS office in Milan. He organization focused on the hotel, mixed-use, shared has more than 17 years experience in Hospitality, ownership, gaming, and leisure industries. Established in Real Estate, and Leisure Real 1980, the company performs 4,500+ assignments each year Estate markets in Europe, Caribbean, Latin America, for hotel and real estate owners, operators, and developers and South Africa. He joined worldwide. HVS principals are regarded as the leading HVS in 2010 having significant experience in experts in their respective regions of the globe. Through a executive positions at Northcourse Advisory Services (Wyndham Worldwide), network of more than 30 offices and 450 professionals, Ernst & Young, and other companies in the hospitality HVS provides an unparalleled range of complementary and real estate field. He is a graduate in Economics and Business Administration and holds a M.Sc. in Tourism services for the hospitality industry. For further information Economics from Bocconi University. Contact him at regarding our expertise and specifics about our services, [email protected] or +39 02 873 43016 please visit www.hvs.com Pavlos Papadimitriou is a Senior Associate with the Athens Office of HVS Superior Results through Unrivalled Hospitality Intelligence. specializing in hotel Everywhere. valuation and financial consultancy. He joined HVS in late 2007 after HVS MILAN, established in July 2012, offers a wide range of completing an MBA from Les Roches School of Hotel expert consulting services for hotels, resorts, serviced Management in Switzerland apartments and mixed-use developments for leading hotel and a BSc in Marketing and Communication from the Athens University of Economics and Business. Since companies, banks, and hotel development and investment then, he has conducted a number of valuations, feasibility studies, and market research analyses in groups. Our consultants have advanced degrees in hotel Croatia, Cyprus, Georgia, Greece, Italy, Montenegro, management, possess hotel operating experience, and Poland, Serbia, , and Turkey. Contact him at provide deep knowledge of the industry in order to assist [email protected] or +30 210 36 12 085. hotel owners, operators, architects, investors, and Panagiotis Verykios is a Consulting & Valuation developers with feasibility studies, valuations, strategic and Analyst with the Athens branding advisory, transaction advisory, operator search, Office of HVS. He joined HVS Athens in late 2014 after asset management services, and market research and receiving a B.Sc. in Hospitality Administration demand analysis. from Boston University’s School of Hospitality Administration. Contact him at [email protected] or +30 210 36 12 085.

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