Hotel Report
In Focus Five stars on Mayfair or no frills next door?
Edition April 2015
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Index
Dear readers, 3
March 2015 in comparison to the previous year 4
Fairmas Trendbarometer 8
In Focus 16
Disclaimer 24
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Dear readers,
The charm of a grand hotel or stylish minimalism? Being spoiled by comprehensive five-star luxury service
or being given just the very basics? When low-priced hotels were opened in German cities during the
economic crisis year of 2008/09, not a few industry experts rubbed their eyes in disbelief. Just a flash in
the pan? The hotel trade’s own economic miracle? The experts still have trouble defining budget hotels,
because it is far too simple to define them solely by price. In this month’s central topic, we deal with the
thought-provoking question of which market has the greater growth potential – luxury or budget? Whilst
the media are primarily focusing on budget hotels as the new kids on the block, we went in search of ob-
jective answers, with reliable Fairmas industry figures as the basis for our analysis.
Although this spring has shown serious weaknesses, the latest trade statistics for the metropolitan re-
gions do show a stable “area of high pressure”. The Fairmas Hotel-Ticker reports on this in detail.
The editorial team hopes you gain some stimulating insights from reading the Fairmas Hotel Report.
(Gabriele Kiessling & Nadine Kilian)
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March 2015 in comparison to the previous year1
A brief overview of hotel performances at selected German destinations:
1 All the figures (daily collected) quoted are comparisons with those for the previous year, rounded to full amounts Source: Fairmas GmbH/STR Global, Data as of 01.04.2015
Berlin
Occ: 74%, ADR: €92, RevPar: €68
The Berlin hotel industry enjoyed a great March.
The month had already started well enough with
the ITB tourist event (4 to 8 March 2014), which
was the subject of more advance bookings this
year than last. The lengths of stay for the trade
fair were higher, resulting in three fairly well booked
exhibition days, instead of more or less two, as in
previous years. The month also saw some confer-
ences and small trade shows, including the Pneu-
mology Congress (18 to 21 March 2014) and the
“Wasser Berlin” event (24 to 27 March 2014), which
both boosted occupancy and ADR. Overall, group
business was far better than last year, with many
tourists arriving, especially at weekends, thanks to
the good weather. Corporate demand was also
high. The Easter school holidays only began on
30 March 2014, which meant a whole week more
business sector trade than last year. Occupancy
increased by 7% year-on-year, with room rates up
by 3%. This led to a healthy (10%) increase in Rev-
Par.
Cologne/Bonn
Occ: 74%, ADR: €125, RevPar: €92
The hotel industry in Cologne/Bonn also had a
great start to the spring. March was marked by
very high room rate increases (up 29%). Occu-
pancy grew significantly (by 8%). Both led to a su-
perb (40%) leap in RevPar. The IDS (international
dental show), which commands very high prices,
is held every three years. This year it took place for
the 36th time from 10 to 14 March. Cologne was
almost fully booked out during the period. There
was also the popular “Anuga Foodtec” event,
which takes place only every three years, this year
from 24 to 27 March. Again, occupancy was very
high, because this trade fair is very much in de-
mand. Many hotels were sold out. Two full weeks
of business sector trade with very strong demand,
as well as a generally unexpected high demand in
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all segments throughout the entire month rounded
off a “mad March”.
Dresden
Occ: 54%, ADR: €66, RevPar: €36
The last Trendbarometer had predicted an ex-
tremely weak March in Dresden. Luckily, this was
not to be the case. Performance actually increased
on a year-on-year basis. Occupancy increased by
2%, ADR also rose, though only slightly, by 0.3%.
RevPar thus increased by over 2%. No conven-
tions were held in the city in March. In addition,
many hotels suspect the coverage of the “Pegida”
demonstrations as being the reason for dwindling
business, especially in the leisure segment. The
otherwise good leisure sector trade at the week-
ends has actually declined. Nevertheless, good
business sector trade can be expected through-
out the month, as the Easter school holidays in
Saxony do not begin until April. Some conventions
and events also had a positive impact on the per-
formance figures.
Dusseldorf
Occ: 73%, ADR: €112, RevPar: €82
Occupancy in Dusseldorf rose significantly (7%)
in March. Carnival was held in February this year;
hence, four full business weeks could be sold. The
“IDS” in Cologne (10 to 14 March 2015) did provide
some overflow business for Dusseldorf, while the
“ProWein” wine event (15 to 17 March 2015) has
gained in popularity from year to year. The “Beauty”
trade fair (27 to 29 March 2015), was also held.
This resulted in good occupancy figures in the
city. The situation was similar with the “Top Hair”
event (28 to 29 March 2015). Furthermore, hotel-
iers reported ample MICE and corporate business.
Overall, it was a very good start to the spring in
Dusseldorf with an increase in RevPar of 40%.
Frankfurt
Occ: 71%, ADR: €123, RevPar: €88
Overall performance in Frankfurt was very positive
because the price-sensitive 2015 Carnival period
was entirely in February. This year, the important
ISH trade fair, held every two years, also took
place. This meant that room rates significantly (+
4%) higher than last year’s could be achieved in
the city, just as predicted by the Trendbarometer.
Despite the Easter school vacations and the public
holidays, which were two weeks earlier this year,
RevPar increased by an extremely positive 7%.
Hamburg
Occ: 78%, ADR: €106, RevPar: €83
Growth in March was predicted for Hamburg, and
this just how it was to turn out. Hamburg was able
to report an ADR increase of 4%, due to a very
strong national event (INTERNORGA), as well as
an international one (a medical congress), and the
city experienced a 4% year-on-year growth in ADR
with correspondingly high demand in the MICE
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sector. This year, CeBIT was held in the same
week as the INTERNORGA event, which gave ho-
teliers the chance to look back on an overall posi-
tive development (RevPar up 5%).
Munich
Occ: 73%, ADR: €109, RevPar: €80
Munich also reported impressive figures for March.
Occupancy improved by 4%, with ADR up by
0.6%. RevPar thus rose by 5%. Last year, the win-
ter school holidays in Bavaria fell entirely in Febru-
ary while the Easter school vacations are largely
in April. This led to a sharp increase in business
travel volumes compared to last year. Conference
business was consequently much improved. This
all had a very positive impact on both occupancy
and ADR. Trade in the group and corporate group
sectors was better. Generally, demand was high
in all segments, and the willingness to buy upsold
products has increased. There was also great de-
mand for Bayern Munich’s games in the Cham-
pions League, the German Cup and Bundesliga.
Major events at the Technical University of Munich
and in the “Gasteig” also meant good trade for ho-
tels near these venues.
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Overview of all destinations
2015 2014 Var. Var. % 2015 2014 Var. Var. % 2015 2014 Var. Var. %
Berlin 73,9% 69,2% 4,7 6,8% 91,9 89,4 2,5 2,8% 67,9 61,9 6,0 9,7%Cologne/Bonn 73,5% 67,8% 5,7 8,4% 124,5 96,5 28,0 29,0% 91,5 65,5 26,0 39,7%Dresden 54,0% 52,9% 1,1 2,1% 65,8 65,6 0,2 0,3% 35,5 34,7 0,8 2,3%Dusseldorf 72,9% 68,0% 4,9 7,2% 112,4 108,7 3,7 3,4% 81,9 74,0 7,9 10,7%Frankfurt 71,1% 69,2% 1,9 2,7% 123,3 118,5 4,8 4,1% 87,7 82,0 5,7 7,0%Hamburg 78,3% 77,6% 0,7 0,9% 106,4 102,1 4,3 4,2% 83,3 79,2 4,1 5,2%Munich 73,3% 70,5% 2,8 4,0% 108,9 108,3 0,6 0,6% 79,8 76,3 3,5 4,6%
*Source: Fairmas GmbH / STR Global, based on data from participants with daily data entry, Data as of 31.03.15
LegendOcc OccupancyAdr Average Daily Rate (net rooms revenue)RevPar Revenue per available Room (net logistics revenue per available room)
Hotel Performance March 2015 /2014*
Occupancy in % Average Daily Rate in Euro RevPar in Euro
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Fig.1: Trendbarometer Berlin 2015 – Trend versus last year
4,2%
-4,7%
1,1%
4,3%
-4,6%
20,1%
8,8%
-9,1%
21,4%
April
May
June
Last Year
Occ ADR RevPar
Source: Fairmas GmbH / Data as of 08.04.2015
Fairmas Trendbarometer
A peek into the future – in detail:
Berlin
The forecasts for April are very reliable. This year,
fewer days of April will be taken up by school
holidays. Hoteliers in Berlin are expecting many
tourists, especially over the Easter weekend and
during the school holidays.
Demand is high and very en-
couraging in the group sec-
tor in particular. High-priced
business sector and conven-
tion trade, especially after the
school holidays, rounds off the
generally optimistic prospects.
The DDG Congress, which be-
gins on April 29, is very well
booked. Occupancy is set to
increase clearly (by 4%), as
are room rates (up 6%). The
underlying good business in the group segment
means that higher room rates can be sought. And
hotels are expecting some short-term corporate
business in the second half of the month. RevPar
is expected to grow by 9%. Preliminary booking
levels are more than promising in all segments.
The projections for May are not nearly as respect-
able. Last year, the ILA air show was held in May.
However, the ILA is only held every two years, so
that the healthy occupancy figures and room rates
it leads to will be missing this year. In addition, the
holidays and long weekend around the first of May,
Ascension and Whitsun all fall in May this year,
so making the month less than satisfactory for
business guests. Berlin is also popular with tour-
ists though, which means that the city’s hoteliers
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anticipate correspondingly good leisure-sector
business and fine weather. However, forecasts are
subdued for the time being. Falls in occupancy
and ADR (both by around 5%) are expected, lead-
ing to a 9% drop in RevPar.
The forecasts for June already look far better. An
increase of 1% in occupancy is expected. Howev-
er, there will also be a very high (20%) year-on-year
increase in room rates (RevPar: +21%). On June
6, the Champions League final, which is already
completely sold out, will ensure a huge surge in
demand over the entire weekend. Room rates
will reach levels similar to those achieved during
the 2006 World Cup final in Berlin. Other events
include the Hauptstadtkongress (Capital City Con-
gress, 10 to 12 June 2014) and the EAN Congress
(20 to 23 June 2015), both of which are already
well booked. All public holidays fall in May this year
(some of them were in June last year). This leaves
four full business weeks, for which demand is very
good. Hoteliers are very confident.
Cologne/Bonn
The last Trendbarometer foresaw no good news
as far as April was concerned. However, expecta-
tions have clearly been revised upwards. Demand
for the FIBO trade fair (9 to 12 April 2015) came
very late, but it did arrive, significantly stronger and
highly priced than had previously been thought
possible. Although this trade fair is always attrac-
tive and has slowly established itself in Cologne,
visitors are much more price-sensitive at week-
ends. The week after Easter is normally much
weaker, although the FIBO trade fair does provide
somewhat more business at this time. Compared
to last year, fewer days of the
Easter school holidays fall in
April, which will greatly boost
the number of business visi-
tors. Occupancy is expected to
rise by 3% and room rates by
a year-on-year 3%, so that a
5% rise in RevPAR is expected.
Agreeable weather over the long
Easter weekend and during the
school holidays may bring the
Fig.2: Trendbarometer Cologne/Bonn 2015 – Trend versus last year
2,6%
-4,2%
3,6%
2,5%
-0,3%
5,1%
5,2%
-4,6%
8,8%
April
May
June
Last Year
Occ Adr RevPar
Source: Fairmas GmbH / Data as of 08.04.2015
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city a little more short-term leisure business. Here
too, preliminary bookings are good.
Hoteliers in Cologne and Bonn are undecided
about the forecasts for May. The “Interzum” (furni-
ture industry trade fair) is being held again from 5 to
8 May after two years’ absence. Hoteliers expect
relevant inquiries over the next few weeks. Hotels
are also expecting short-term bookings for the last
weekend in May, when the LANXESS arena again
holds the “Champions League Final4” team hand-
ball event. The public holidays and long weekends
could, of course, attract a great deal of leisure
business to the city at short notice if the weather
conditions are favourable. The “FESPA” show, an
event held at different venues was supposed to
have a great deal of potential, but there have been
many cancellations in the past few weeks. Never-
theless, hotels are still cautious and expect a fall of
4% in occupancy. Room rates
are likely to decline slightly (by
0.3%). That would mean a de-
cline in RevPar of almost 5%.
June, however, will be very
good. Demand is strong in all
segments, be it leisure, busi-
ness sector or conference
business. The “ANGA COM”
and the “VICTAM” (together
with the “FIAAP” and “grapas”
events) are being held at the beginning of June,
both at the same time (9 to 11 June 2015). The
GIFA trade show in Dusseldorf (16 to 20 June
2015) will provides plenty of overflow business in
Cologne. In addition, the public holidays all fall in
May, so that four full business weeks are also avail-
able in Cologne/Bonn. Major concerts by Helene
Fischer (on 15 and 16 June) and AC/DC (19 June
2015) are generating further business. And good
weather will (given the right circumstances) ensure
even more spur-of-the-moment city breaks. Over-
all, occupancy is expected to be 4% up on last
year’s figure and room rates by 5% (with RevPar
up 9%).
Dresden
Dresden hotel industry was originally more confi-
dent with its expectations for April. Unfortunately,
these healthy projections have had to be adjusted
Fig.3: Trendbarometer Dresden 2015 – Trend versus last year
-1,4%
2,0%
2,4%
-0,6%
-2,0%
2,6%
-2,0%
-0,1%
5,1%
April
May
June
Last Year
Occ Adr RevPar
Source: Fairmas GmbH / Data as of 08.04.2015
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downwards. More leisure sector business had
been expected at Easter. The Easter holidays are
earlier than last year, which will mean that fewer
tourists will visit the city because of the worse
weather conditions being experienced this year.
Hotels are still anticipating healthy tourist business
during the school vacations and public holidays.
The second half of the month has also been devel-
oping slowly; so far the meeting and group book-
ings figures have hardly been promising. Hoteliers
are thus expecting a 1% slide in occupancy in
April. The hotels assume a generally declining ADR
(down 0.6%). This would also mean a 2% drop in
RevPar compared to last year.
The hotel industry in Dresden is hoping for some
improvement for May. It is likely to be warmer and
that the sun will be shining and so the number of
tourists in the city will rise. The long weekends
around 1 May, Ascension Day (both in May this
year) give rise to hope for improved performance
figures. Moreover, the G7 Summit of Finance Min-
isters is being held in the city (27 to 30 May 2015),
and many inquiries have already been made in re-
lation to it. However, the expected large allocation
bookings from individual delegations have so far
been absent, unfortunately. In terms of occupancy,
the hotels do not expect any very large changes
compared to last year. Occupancy is expected to
increase by 2%. However, ADR is predicted to fall
by 2%, which would mean a 0.1% decrease in
RevPar.
June was not a particularly successful month in
Dresden last year but things could well be better
this time around. Increases of 2% in occupancy
and 3% in ADR are predicted. Since all the public
holidays fall in May, the city’s hotels are hoping for
a strong increase in demand from business and
meeting sector business in June. This traditionally
means higher room rates than in the leisure and
groups sectors. Beautiful weather could also at-
tract large numbers of tourists to the city, espe-
cially at the weekends. Even if there are no trade
fairs or congresses in Dresden this June, there is
much going on in the city with the “BRN” event,
the movie nights on the banks of the Elbe and the
“Elbhangfest”. Hoteliers remain optimistic and ex-
pect a 5% RevPAR increase.
Dusseldorf
Expectations for April are again exceptionally
gloomy, with a projected 28% drop in RevPar,
mainly due to the high (over 27%) fall in room rates.
This is mainly due to the absence of the important
“Wire & Tube” trade show (held only every other
year) in 2015. Hoteliers are still hoping that the
positive predictions in terms of occupancy (Occ:
up 0.1%) will be achieved, due to growing leisure
business at Easter.
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According to the Trendbarometer, May will be very
negative as far as all three indicators are con-
cerned (Occ down by 16%, ADR by 41%, and
RevPar falling by a massive 51%). There are many
public holidays this May, including Whitsun (Pente-
cost), which fell in June last year. There will thus be
much less corporate and MICE business this year
than in 2014. In addition, the “Interpack” trade fair
was held in May 2014. It is only due to take place
again in 2017 (it is held every three years).
June is looking very good, as at many other des-
tinations, especially when it comes to the forecast
room rates (ADR: +36%). Very high room rate lev-
els are also expected thanks to the A-list trade fair
“GIFA” (held every four years) running from June 16
to 20. High demand in the MICE and corporate
segments has so far been reported for the remain-
ing weeks of June.
Frankfurt
The absence of the “Light & Building” event from
Frankfurt this year (the last one was held from 30
March to 4 April 2014) had a very adverse effect on
room rates in April, with ADR down by 4%. Even
though this year’s “Musikmesse” is in demand, it
is unable to sustain the room rate levels achieved
by the “Light & Building” event. Experience shows
that little corporate business can be expected dur-
ing the Easter school holidays (the first two weeks
of April this year). The “Musikmesse” will only re-
turn in the third week of April, so
that hoteliers can merely expect
an increase in room rates from
the end of the month onwards.
The pick-up for this, howev-
er, will only become apparent
much later.
There is one more public holi-
day this May than a year ago,
and this will affect corporate
business in terms of occupan-
cy (Occ down 7%). However,
higher room rates (up 4%) are
expected. This year, the “Techtextil/Techprocess”
event (last held in 2013) is taking place. Even
though this is not an A-list trade fair, it may still
Fig.4: Trendbarometer Dusseldorf 2015 – Trend versus last year
0,1%
-15,9%
4,4%
-27,7%
-41,4%
36,1%
-27,6%
-50,7%
42,1%
April
May
June
Last Year
Occ Adr RevPar
Source: Fairmas GmbH / Data as of 08.04.2015
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raise ADR. It can be assumed that pick-up will still
develop overall.
So far, forecasts for June have been very optimis-
tic as far as all three key indicators are concerned
(Occ: +14%, ADR: +25%, and RevPar: +43%).
This year, the leading ACHEMA trade fair (held eve-
ry three years) will be held from the 15 to 19 June
2015. High room rate levels are expected during
this period. Moreover, there are no further public
holidays or school vacations in June except for
one public holiday (Corpus Christi) in the first week
of June. Otherwise, the remaining weeks of June
will be for conference and corporate business.
Hamburg
The outlook for April in Hamburg is also positive
in terms of all three indicators (Occ: +4.5%, ADR:
+3.4% and RevPar: +8.1%). An increase in room
rates is expected because of
the strong international trade
fair (International Aircraft In-
terior) and the annual Haspa
Marathon (held in May last year).
Leisure segment demand at
Easter is already very satisfac-
tory, especially at the weekend.
April is generally a very lively
business month in Hamburg,
demonstrating stability as far as
the business groups and MICE
segments are concerned.
This year’s “Hafengeburtstag” (Harbour Birthday) is
again generating high demand. Furthermore, this
year’s May Day public holiday falls on a Friday, so
that travellers need not take an extra day off work
to enjoy a long weekend. Many hoteliers have
already reported very good advance bookings
thanks to high-price leisure business. This year’s
Röntgenkongress (Congress of Radiology) from 13
to 16 May, being held in Hamburg for the last time,
will ensure a 3% increase in room rates. Overall, a
4% RevPar increase is expected in May.
June, according to hoteliers’ statements, is also
developing quite positively with an overall increase
in RevPar of nearly 6%. The International Hafen-
kongress (Port Congress; 1 to 4 June 2015) , as
well as various sporting highlights, such as the
Fig.5: Trendbarometer Frankfurt 2015 – Trend versus last year
4,0%
-7,3%
14,0%
-4,0%
4,0%
25,3%
-0,2%
-3,6%
42,9%
April
May
June
Last Year
Occ Adr RevPar
Source: Fairmas GmbH / Data as of 08.04.2015
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“IGLFA” (International Gay and Lesbian Football As-
sociation) Euro Cup and the “Harley Days” at the
last weekend in June (last year it took place in July)
are generating high demand in the city.
Munich
Hoteliers in Munich will also have to wait to see
how the weather will be at Easter. Good weather
could mean a great deal of short-term business.
Occupancy is expected to rise by 0.1%. No trade
fairs are being held in Munich this April but the
Easter holidays come at the right time, so leaving
three full business weeks in April, a month which
is also expected to enjoy good business sector
trade. Then there is also the first of May, which
falls on a Friday this year, so making the business
week one day longer than in 2014 (last year, May 1
fell on a Thursday). Leisure sector demand is also
high, especially during the school holidays and at
the weekends. A major soccer
match is also being played on
the last holiday weekend. Con-
sequently, hoteliers are confi-
dent of an improvement in room
rates (+1%) and hence a 1% in-
crease in RevPar.
There is little optimism in the
Munich hoteliers’ forecasts for
May. This year, the IFAT event is
not taking place. The “transport
logistic” (5 to 8 May) will not be able to compen-
sate for the lack of business visitors and high room
rates. The number of public and school holidays
will also push room rates down. It will be difficult
to get supply and demand to match up because
inquiries are focused on just a few short periods.
A great deal of short-term top-up business is ex-
pected, especially from the individual and group
segments, as well as wholesale business, which
forces down room rates. Occupancy is expected
to decline by 1% and ADR is predicted to fall by
as much as 7%, leading to an 8% drop in RevPar.
June should be much better, as in many other plac-
es. Far fewer public holidays fall in June than last
year, and only one week of the Whitsun holidays
does. This allows much more room for business
sector trade than last year. However, Ramadan be-
gins earlier than in 2014 (18 June 2015), meaning
Fig.6: Trendbarometer Hamburg 2015 – Trend versus last year
4,5%
1,2%
2,2%
3,4%
2,7%
3,2%
8,1%
3,9%
5,5%
April
May
June
Last Year
Occ Adr RevPar
Source: Fairmas GmbH / Data as of 08.04.2015
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that Arab guests will leave even
earlier. However, Munich hotel-
iers do expect some additional
business from the G7 summit at
Schloss Elmau. An occupancy
increase of 2% and an ADR
increase of 6% are confidently
expected. This would boost
RevPar by almost 8%. And
good weather at the weekends
and during the holidays will
surely lead to some extra leisure
business.
Fig.7: Trendbarometer Munich 2015 – Trend versus last year
0,1%
-1,2%
1,9%
1,2%
-7,2%
5,6%
1,3%
-8,2%
7,5%
April
May
June
Last Year
Occ Adr RevPar
Source: Fairmas GmbH / Data as of 08.04.2015
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In Focus
Five stars on Mayfair or no frills next door?
Luxury versus budget – which is growing faster? Who is winning the race?
From the charm of historic grand hotels to the sustainable coolness of urban lifestyles - luxury hotels are
either legendary or have what it takes to become so. This segment in particular has had to recover from
commercial losses following the economic and financial crisis of 2009. The sharp decline in business
overnight stays has revealed one major cause of the low price levels in the German luxury hotel segment:
overcapacities.
Despite an upward movement (first quarter 2015
compared to last year: Occ +1.5%, ADR +4.1%,
and RevPar +5.0%), five-star hotels in Germany
are still marked by lower room rates than in other
leading countries worldwide. This is confirmed by
the latest figures: In 2014, average room rates in
the five-star segment only rose slightly (by 1.1%),
reaching a net average of €157. In 2014, the aver-
age room revenue (RevPar) increased by 3.3% to
€111. With these values, the German luxury hotel
market again only occupies a place towards the
bottom in European and international compari-
son. In particular, luxury-aware international tour-
ists, mainly from the Gulf States, Russia or China
are still generating moderate growth, preferably
at such destinations as Munich, Dusseldorf and
Hamburg. For many, a night in a luxury hotel is the
norm. Of course, these well-heeled guests are be-
ing wooed by five-star hotels, leading to increased
market pressures in the top-class segment.
Although the evaluation criteria for the upmarket
hotel industry are clearly defined, in this sector in
particular, (alongside gold-plated taps) the intangi-
ble aspects of perfect hospitality, in which wishes
are met even before they have been expressed,
are what counts today.
In recent years, however, the budget hotel seg-
ment – above all – has attracted more and more
media coverage. Even experts have problems in
finding definitions for this youngest member of the
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this can be explained by trade show cycles or on
the other hand by very diverse clienteles. For ex-
ample, the five-star hotel trade in Hamburg was
able to increase its RevPar by an average of 4.8%
annually between 2011 and 2014. Hamburg even
has a number of flagship luxury sector hotels,
which can attract guests just by their name alone.
Fully booked houses are more common here than
anywhere else in Germany. The number of visitors
from the Gulf States to Hamburg is continuing
to grow. These guests often stay for a long time
– generally in conjunction with medical treatment –
and book into luxury hotels. In contrast, the annual
3.3% growth rate for the city’s budget hotels does
seem relatively weak.
Similar developments can also be observed in
Dusseldorf, Cologne, Frankfurt and Munich. Only
in Berlin is everything is different again ... we will
now highlight the inhomogeneity of the trends and
their causes in more detail using the examples of
Berlin and Munich.
Berlin
Along with London and Paris, Berlin is one of the
well frequented capitals of Europe. The variety of
attractions, the cultural offerings, the city’s special
history, the tolerant, multicultural and yet still unfin-
ished atmosphere all generate an ever-increasing
hotel family. Definitions based on price alone have
long since proved themselves impractical. Budget
hotels are consistently endorsed as having attrib-
utes that can be best described as “no frills” – a
product with a great price-performance ratio and
a clearly defined standard level. It has long been
clear that budget hotels are not an economic flash
in the pan; they often boast a prime downtown lo-
cation, modern design and modular service.
The latest Fairmas figures also show the model’s
potential: (the first quarter of 2015 compared
with the same period last year: Occ: +4.3%, ADR
+1.6%, RevPar: +3.9%). The average room rate in
the budget segment grew by 2% in 2014, reaching
a net average value of €64. In 2014, the average
room revenue (RevPar) rose 2.5% to €47 – some-
what weaker than the five –star market. Are the
luxury hotels really the winners?
Meanwhile, even industry giants such as Intercon-
tinental and Hilton have discovered the socially
acceptable and sensitive market of budget hotels
for themselves; the cake seems to be a large one
that whets the appetite. This raises the interest-
ing question of which growth market has the larger
potential: the luxury or budget sector?
Overall analysis reveals a general trend of growth
for both segments. However, the differences are
huge, depending on the destination. For one thing,
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number of overnight
stays. New record
visitor numbers are
recorded every year,
figures that no other
German city can
compete with. There
have also been re-
cord numbers of
conferences. How-
ever, the City Cube
as successor to the International Congress Center
has nowhere near enough capacity to replace the
ICC completely. In the past, many events have had
to be called off in the past, and it will not be possi-
ble to satisfy the large demand in the future, either.
However, the city was bottom in terms of net aver-
age rates. Here, Berlin lags far behind comparable
European competitors. Berlin is regarded as the
“capital of the small prices” and is one of Europe’s
most competitive
hotel markets. The
low average prices
are observed princi-
pally in the upscale
and luxury market
sectors. Differences
in price are minor.
Here, the emerging
budget market has
been taking guests away from higher price-class
hotels in recent years following the onset of the
global economic and financial crisis. The reasons
are not least the increasing transparency of room
rates through online travel portals, but also the
young, price-conscious lifestyle public.
In terms of hotel performance (RevPar - revenue
per available room) an annual growth rate (CAGR
- compound annual growth rate: 2011-2014) of
Fig.8: Performance development – 5* hotels in Berlin
Var. Var.% Var. Var.% Var. Var.%
2014 74,3% 3,0 4,2% 63,3 6,3 11,1% 47,0 6,4 15,7%2013 71,3% -2,0 -2,7% 57,0 -0,9 -1,6% 40,6 -1,8 -4,2%2012 73,3% 0,8 1,1% 57,9 2,4 4,3% 42,4 2,2 5,5%2011 72,5% 55,5 40,2Compound Annual Growth Rate (CAGR)
0,82% 4,48% 5,34%
Berlin Budget
Occupancy Average Daily Rate in Euro RevPar in Euro
Source: Fairmas GmbH / Data as of 08.04.2015
Fig.9: Performance development – Budget hotels in Berlin
Var. Var.% Var. Var.% Var. Var.%
2014 74,1% -0,5 -0,7% 148,8 1,1 0,7% 110,3 0,1 0,1%2013 74,6% -0,3 -0,4% 147,7 -0,7 -0,5% 110,2 -1,0 -0,9%2012 74,9% 2,8 3,9% 148,4 7,6 5,4% 111,2 9,6 9,5%2011 72,1% 140,8 101,5Compound Annual Growth Rate (CAGR)
0,92% 1,86% 2,79%
Berlin 5*
Occupancy Average Daily Rate in Euro RevPar in Euro
Source: Fairmas GmbH / Data as of 08.04.2015
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over 5% has been recorded in the budget seg-
ment and 2.8% in the five-star market over the
last three years. Berlin is marked by steady and
healthy growth, especially in terms of budget ho-
tels, even though several new hotels have entered
the market, particularly in this segment. In contrast,
the 350 new five-star rooms in 2014 already seem
quite modest.
The very strong demand even allows budget hotels
to increase the room rates. There was therefore
a sharp (11%) upturn in room rates compared to
last year, resulting in a seemingly record-breaking
16% RevPar increase for 2014. The current perfor-
mance figures for the first quarter are also exciting.
While RevPar in the budget range increased year-
on-year from €34.7 to €40.3 (a plus of 16%), the
figures in the five-star range only show a moderate
growth, with a 0.5% increase in RevPar compared
to the first quarter of 2014.
In recent years, the changes in business custom-
ers’ travel behaviour have increasingly led to a fall
in demand in luxury business and conference ho-
tels. Overnight stays in the new, sometimes very
stylish budget hotels have been the norm pursued
in many companies. These hotels impress cus-
tomers with their affordable prices and innovative
concepts in attractive inner-city locations. The
publicity centred on the budget hotels is further
boosted as demand grows and the trend towards
short-term city breaks increases (taking the whole
family along where possible). Meanwhile, a highly
varied product range has developed involving
many different market players, which increasingly
links the emotional aura of “budget as an experi-
ence” and “budget is trend” with the demand for
individual products.
In the capital, the positive development in the
budget range can also be clearly felt; it is espe-
cially noticeable in the months of weak demand.
And the signs are pointing to further growth. Both
the Berlin branch of the German Hotel and Restau-
rant Association (DEHOGA), as well as “visitBerlin”
(Berlin’s tourism marketing organization) assume
that the capital will record more than 30 million
overnight stays by the end of 2016.
The Berlin hotel market is not only the largest in Eu-
rope, but clearly also the most exciting and most
turbulent. Trends are born here: the rapidly grow-
ing and colourful budget segment is one of them!
Munich
For the twelfth year in a row, tourism figures for
Munich have known only one direction: upwards.
In 2014, the Bavarian capital recorded 13.4 mil-
lion overnight stays - an increase of 4.3 percent
over the year before. Most visitors came from
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German-speaking countries, though the number
of international guests from further afield also rose
briskly.
In 2014, the five-star hotel trade in Munich ben-
efited from a very strong trade show year and from
many major medical
congresses. This
clientele does not
belong to the des-
ignated target group
of budget hotels.
Moreover, Munich
experienced a sharp
rise in demand from
Middle Eastern
guests last year. As
this target group is
very wealthy and stays mainly in four to five-star
hotels for a longer period, the budget segment will
not be able to benefit from this development. In ad-
dition, the higher categories of hotels also benefit
from large groups, events and conventions, which
then are preferably
held in five-star ho-
tels.
This is also con-
firmed by the growth
rate (analysis period
2011-2014), dur-
ing which Munich
(together with Dus-
seldorf) holds the
top spot. These two
cities are the front-runners in the luxury segment
with annual growth of 7.6%. During the first quar-
ter in Munich, the Occ, ADR and RevPar in both
the budget and luxury sectors were exceptionally
Fig.10: Performance development– 5* hotels in Munich
Var. Var.% Var. Var.% Var. Var.%
2014 79,8% 2,5 3,2% 225,9 7,6 3,5% 180,3 11,5 6,8%2013 77,3% -0,3 -0,4% 218,3 14,3 7,0% 168,7 10,4 6,6%2012 77,6% 0,8 1,0% 204,0 15,7 8,3% 158,3 13,7 9,5%2011 76,8% 188,3 144,6Compound Annual Growth Rate (CAGR)
1,29% 6,26% 7,62%
Munich 5*
Occupancy Average Daily Rate in Euro RevPar in Euro
Source: Fairmas GmbH / Data as of 08.04.2015
Fig.11: Performance development– Budget hotels in Munich
Var. Var.% Var. Var.% Var. Var.%
2014 78,4% 1,8 2,3% 74,5 -3,8 -4,9% 58,4 -1,6 -2,6%2013 76,6% 0,1 0,1% 78,3 3,5 4,7% 60,0 2,8 4,8%2012 76,5% 1,9 2,5% 74,8 6,2 9,0% 57,2 6,0 11,8%2011 74,6% 68,6 51,2Compound Annual Growth Rate (CAGR)
1,67% 2,79% 4,50%
Munich Budget
Occupancy Average Daily Rate in Euro RevPar in Euro
Source: Fairmas GmbH / Data as of 08.04.2015
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good, with RevPar increases of over 20% in the
budget segment and 13.2% in the five-star hotels
when compared to the first quarter of 2014.
If one again looks more closely at the occupancy
rates (nearly 80% in in both segments), it is clear
that there is little room left for improvement here.
Last year, some new competitors also came on
the scene. Compared to Berlin, the ADR of the
budget hotels is very high. It can be assumed that
the average room rates of the five-star hotels will
also have a positive influence on the ADR of the
budget hotels
Conclusion
The industry is growing: this positive signal delights the hosts, and the certainty it means is helping to cope
with seasonal “dry spells”.
For the trade show destinations, 2014 was a strong year overall, which positively influenced the high room
rates in the corporate and MICE segments of the luxury market.
If we differentiated further, some major disparities are revealed. Whilst in Berlin, the budget hotels were
the industry’s high fliers in 2014 (RevPar up 16%), there was a slowdown over the same period in Munich,
with RevPar falling by 3%. A very different picture between the two cities is revealed in the five-star hotel
business. {Hier wuchs die Hauptstadt moderat (RevPar: + 0,1%), während die Münchner Hoteliers im
Luxussegment ordentlich zulegten (RevPar: + 7%). |Here, growth in Berlin was very moderate (RevPar up
0.1%), while Munich’s luxury-segment hoteliers experienced healthy expansion (RevPar: + 7%). This is not
least due to the different target groups.
Many budget hotels (especially chains such as Motel One) appeal especially to the younger generation
with their bright interiors and the great value that they offer; guests know what they are getting for their
money. This is confirmed by business travellers, who will be able to find the modern technical equipment
they require and much more besides at their actual destination (i.e. little of it at the hotel). And yet, the trend
towards greater luxury is unmistakable in this target group too: pleasure as quality of life. Fewer golden
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taps and instead much greater freedom and self-determination: because as before, the diverse luxury seg-
ment has lost none of its appeal (and for some it is a distinctive status symbol). The boom in the upmarket
sector is especially fascinating for young, up-and-coming decision-makers. However, this means that new
approaches are demanded in the luxury sector in terms of marketing and sales (omnipresent multimedia
possibilities, maintaining the sensitive balance between technical all-round solutions, a personal approach
to guests, and so on).
Above all, the guests’ decisions reveal tolerance and an enjoyment of change and discovery: they want
both: The low-budget hotel on a business trip and the luxury spa at the weekend or simply comfort during
business and “no frills” during a weekend city trip with the whole family. This way, both sectors will benefit.
The expansion of the budget hotels is occurring at the expense of small, privately owned hotels and board-
ing houses, which are often being forced to their financial limits. While the latter often lack the resources
needed for investment, the budget hotels are able to win over guests with their modern diversity and stylish
profile. However, by no means everything that glitters is gold: Many budget hotels are operated as fran-
chises, and their quality may differ greatly in terms of service and compliance with standards.
Would you like to have more information?
Every day we collect data from over 1,100 hotels in Germany: up-to-date information
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The Fairmas Hotel Report is published by:
Fairmas Gesellschaft für Marktanalysen mbH, Sachsendamm 6, 10829 Berlin, Deutschland
Solutions Dot WG GmbH, Kranzer Strasse 6-7, 14199 Berlin, Deutschland
Fairmas Gesellschaft für Marktanalysen mbH specializes in market
analyses and the development of planning and controlling software
for the hotel industry. The company offers its international clientele a
hotel benchmarking platform, as well as various software applications
for the fields of budgeting, forecasting, controlling, management re-
porting and work process optimization.
As a strategic management consultancy, Solutions Dot WG develops
individual and customized strategies and solutions for companies in
the hotel, catering and tourism, and provides support in implementing
plans. Solutions dot also manages independent project implementa-
tion, is active in support management and interim management, as
well as in the total quality management (TQM) sector.
The Fairmas Hotel Report is edited by:
Nadine Kilian, Marketing & Communications Manager,
Fairmas Gesellschaft für Marktanalysen mbH, e-mail: [email protected]
Gabriele Kiessling, Consultant und Project Management,
Solutions Dot WG GmbH, e-mail: [email protected]
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Disclaimer
No representation or warranty (express or implied) is given as to the accuracy or complete-ness of the
information contained in this publication, and, to the extent permitted by law, Fairmas GmbH / Solutions
Dot WG do not accept or assume any liability, responsibility or duty of care for any consequences of you
or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for
any decision based on it.