hotel report - · pdf filesuch events as the sap teched (11to 13 2014) and those connected...
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Hotel Report
In Focus Correlation of the overall economic development in relation to the supply and demand trends in the hotel industry
Edition December 2014
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Index
Dear readers, 3
November 2014 in comparison to the previous year 4
Fairmas Trendbarometer 8
In Focus 16
Disclaimer 22
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Dear readers,
The year is drawing to a close. However, it is not yet the time for us to look back. Instead, we will investi-
gate the question of whether the hotel industry is a separate branch of the economy and how it is related
to the overall economy. Which indicators play a role when we want to judge whether a new hotel project
is going to be successful? Which factors should be used for assessing a location?
Professor Christian Buer from the University of Heidelberg has investigated the relationship between
economic development and the development of the hotel business for us. You can find an abstract of his
scientific treatise in this issue of the Hotel Report. Of course, you can also read the entire work here:
http://www.fairmas.com/sites/default/files/aktuelles/forschung_prongnosehotel_allgshort_nov14.pdf
We wish all our readers a peaceful and merry Christmas and an enjoyable start to the New Year, when we
will report back with an annual review.
The editorial team wishes you an enjoyable time reading the Fairmas Hotel Report.
(Gabriele Kiessling & Nadine Kilian)
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FairmasHotel Reportin cooperation with SolutionsDotWG
November 2014 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 05.12.2014
Berlin
OCC: 76%, ADR: €88, RevPar: €67
The anniversary of the Fall of the Berlin Wall over
the weekend of 8/9 November managed to get
the hoteliers in Berlin cheering, too. The celebra-
tions attracted numerous visitors to the city, which
boosted occupancy greatly. The first weekend of
Advent meant strong occupancy figures for the
city. Overall, business sector trade in November
was also very strong, as expected. Not only did
such events as the SAP TechEd (11to 13 2014)
and those connected with the Bambi entertain-
ments award presentations bring large numbers of
visitors to the city, there were also many business
and event inquiries. The slight (- 1%) decrease in
room rates was due to the high proportion of leisu-
re guests. All the same, November in Berlin was a
very strong month, thanks to the steep (10%) year-
on-year increase in occupancy, combined with a
9% rise in RevPar.
Dresden
Occ: 58%, ADR: €73, RevPar: €42
The hotel industry in Dresden enjoyed an overall
successful November. Most hoteliers had not ex-
pected it but demand was significantly higher than
for the same month last year, even in the corporate
sector. Autumn has so far proved quite mild, which
has benefited tourist demand. However, many ho-
tels had already cut prices in anticipation of poor
November trade. The first weekend of Advent had
already been well booked in many hotels thanks to
the opening of the Striezel market (27 November
2014). This meant there was a 4% RevPAR incre-
ase in November (despite the 0.8% slide in room
rates) due to the 5% growth in occupancy.
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Dusseldorf
OCC: 74%, ADR: €123, RevPar: €94
November was a gloomy month for Dusseldorf’s
hoteliers. Occupancy fell by 1%, room rates by as
much as 7%, while RevPar fell by 8% on a year-on-
year basis. There was a lack of demand for events
in November. Besides this, the “A+A” trade fair,
which takes place every other year, was absent in
2014. Last year, it had been accompanied by high
room rates. The annual, major four-day “Medica”
trade fair from 12 to 14 November 2014 was usa-
ble to impress, with generally poor results in terms
of overall performance, even though higher room
rates than last year could be achieved.
Frankfurt
Occ: 72%, ADR: € 102, RevPar: €74
Even if November is usually a good corporate and
conference month in Frankfurt, it was rather a ne-
gative one this year (Occ: up 3%, ADR: down 4%).
The general downturn in conference business was
the main reason for the overall negative ADR de-
velopment. There was also a shortage of individual
pickup in many hotels. Not even the annual Eu-
roMold trade fair (24 to 28 November 2014) was
able to improve room rates, even if the event was
much more successful than 2013 (RevPar up by
17%). The growing number of beds is leading to
increasingly cut-throat competition. Many hotels
(especially in the four-star segment) had reported
very good performance figures last year, thanks to
the EWEA Offshore Congress (2014: Occ fell by
19%, with ADR 28% down and RevPar suffering a
massive 42% decline).
Hamburg
OCC: 80%, ADR: €108, RevPar: €87
The Trendbarometer promised good news for
Hamburg, which then became reality. November
was marked by a very positive (5%) year-on-year
growth in RevPar. Generally, the Hamburg Hotels
confirmed the prediction that this November’s
business would be blessed by especially good
advance bookings from the corporate and confe-
rence sectors, coupled with a high demand in the
transient segment (Occ up by 3% and ADR 2%
higher). Some hoteliers reported large increases in
short term pickup business, as well as in the indi-
vidual city breaks. The mild temperatures this year,
combined with the annual Christmas shopping
services provided Hamburg hoteliers with very sa-
tisfactory leisure-sector trade.
Cologne/Bonn
OCC: 74%, ADR: €95, RevPar: €70
Hoteliers in Cologne/Bonn had not anticipated any
forecasts of growth at all. And indeed, demand du-
ring business weeks and at the weekends was less
than in previous years. The Medica in Dusseldorf
(12 to 15 November 2014) did not give the city very
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much in the way of overflow trade, but room rates
during the period were significantly higher than last
year. Leisure business for the first weekend in Ad-
vent came about very slowly, but it did then ensure
good pickup. Overall, losses were not as big as
feared, though occupancy increased only slightly
by 0.1% and ADR rose by just 1%, resulting in a
1% growth in RevPar.
Leipzig
OCC: 70%, ADR: €84, RevPar: €59
November in Leipzig was marked by a 7% year-on-
year increase in RevPar, mainly due to the growth
in room rates (over 13%). The main reason for the
development was this year‘s autumn conference
of the German Diabetes Society, which took place
from 21 to 22 November 2014 in conjunction with
the annual meeting of the German Obesity Society.
The combined event meant sizeable room rates in
the city. The JCI World Congress (an event held
at rotating venues) , which took place from 24 to
29 November, provided additional business for the
Leipzig hoteliers, as well as ensuring high room ra-
tes. Occupancy dropped by 6%.
Munich
OCC: 78%, ADR: €130, RevPar: €101
The autumn school holidays in Bavaria fell comple-
tely within October this year, and consequently had
no negative effect on November. This meant that
November was marked by a whole extra business
week than last year. The “electronica” trade show
(11 to 14 November 2014) brought some healthy
exhibition business at high room rates to the city,
stronger than last year’s “Productronica” event. In
addition, general demand in the meeting sector
and the business travel field was remarkable. Mo-
reover, both individual and group business results
were also strong. The first weekend of Advent en-
sured a great deal of Christmas market tourism.
It was an excellent November for the Munich ho-
tel industry with significant performance improve-
ments on all levels – year-on-year occupancy rose
by 5% and room rates by 12% (RevPar was up by
18%).
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Overview of all destinations
2014 2013 Var. Var.% 2014 2013 Var. Var.% 2014 2013 Var. Var.%
Berlin 75,8% 68,9% 6,9 10,0% 88,2 89,4 -1,2 -1,3% 66,9 61,6 5,3 8,5%Cologne/Bonn 74,1% 74,0% 0,1 0,1% 95,0 94,1 0,9 1,0% 70,4 69,6 0,8 1,1%Dresden 58,3% 55,3% 3,0 5,4% 72,5 73,1 -0,6 -0,8% 42,3 40,4 1,8 4,6%Dusseldorf 74,0% 74,9% -0,9 -1,2% 127,6 137,2 -9,6 -7,0% 94,4 102,8 -8,3 -8,1%Frankfurt 72,2% 70,4% 1,8 2,6% 101,8 105,6 -3,8 -3,6% 73,5 74,3 -0,8 -1,1%Hamburg 80,2% 77,7% 2,5 3,2% 107,8 105,6 2,2 2,1% 86,5 82,1 4,4 5,4%Leipzig 69,9% 74,0% -4,1 -5,5% 84,2 74,3 9,9 13,3% 58,9 55,0 3,9 7,0%Munich 77,9% 74,0% 3,9 5,3% 130,2 116,4 13,8 11,9% 101,4 86,1 15,3 17,8%
*Source: Fairmas GmbH / STR Global, based on data from participants with daily data entry, Data as of 01.12.2014
LegendOCC OccupancyADR Average Daily Rate (net rooms revenue)RevPar Revenue per available Room (net logistics revenue per available room)
Hotel Performance November 2014/2013*
Occupancy in % Average Daily Rate in Euro RevPar in Euro
10,0%
0,1%
5,4%
-1,2%
2,6% 3,2%
-5,5%
5,3%
-1,3%
1,0%
-0,8%
-7,0%
-3,6%
2,1%
13,3%11,9%
8,5%
1,1%
4,6%
-8,1%
-1,1%
5,4%7,0%
17,8%
Berlin Cologne/Bonn Dresden Dusseldorf Frankfurt Hamburg Leipzig Munich
Occ ADR RevPar
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Fig.1: Trendbarometer Berlin 2014 – Trend versus last year
1,0%
3,5%
-0,8%
-0,7%
-1,8%
-4,6%
0,3%
1,6%
-5,4%
December
January
February
Last Year
Occ ADR RevPAR
Source: Fairmas GmbH / Data as of 05.12.2014
Fairmas Trendbarometer
A peek into the future – in detail:
Berlin
December does not promise any major changes
from last year (Occ: +1%, ADR: -0.7%, and Re-
vPar: +0.3%). Business sector trade will decline
steadily and the majority of travellers will be from
the leisure segment during the weeks of Advent
and the Christmas holiday period itself. It will there-
fore be difficult to increase in room rates. Berlin
hoteliers are still expecting good business sector
trade in the first two weeks of the month. The num-
ber of shopping and Christmas market tourists will
be around last year‘s level. Demand at the Advent
weekends has always been high in recent years.
New Year‘s Eve and the days leading up to it are
highly promising because the public holidays are
very convenient for employees this year; using just
a few days of their vacation
they can manage take the
whole week off. Nonetheless,
December this year will be a
classic low-season month
with little group sector trade
or business visitors.
Early 2015 promises to be
healthy. In January, a 4% in-
crease in occupancy is expec-
ted. Employee-friendly long
weekends at the end of the
year will ensure plenty of leisure business, though
room rates will be weaker. Hoteliers have so far
been cautious about predicting the Green Week
and Berlin Fashion Week because both events
were poorer in 2014 than in previous years. Be-
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sides that, the Grüne Woche (“green week”) has
little relevance in terms of overnight bookings and
then only in the West of the city. On the other hand,
the “Bread & Butter” fashion event is increasing in
importance. However, ambiguous communication
on the part of the organizers about whether this
trade fair should now take place in Berlin or Barce-
lona has meant that some hotel rooms have been
sold at lower prices. Currently, it is estimated that
the average room rate will fall by 2% (with Rev-
Par up by2 %). Nevertheless, advance bookings
are looking respectable. In recent years, January
has turned into a great kick-off convention month.
However, room rates are too low because after all,
everyone wants a piece of the pie.
February is predicted to be significantly weaker.
Occupancy is likely to decline a little (down 0.8%).
However, ADR is likely to fall by almost 5%. A de-
cline of more than 5% in RevPar is also expected.
The BAUTEC trade show will not be taking place in
February 2015. It is only held every two years and
it led to very good room rates in the city last year.
The Krebskongress (Cancer Congress) is also held
every other year and will be absent in February
2015. Nevertheless, preliminary booking levels for
the conference business in many hotels are good.
The “Fruit Logistica” event also has the potential to
boost performance, so that many hotels are con-
fident the forecast will still turn
out to be positive after all.
Cologne/Bonn
Hoteliers in Cologne/Bonn
are cautiously positive in their
forecasts for December. They
expect a 3% increase in occu-
pancy combined with a 0.5%
decrease in ADR, resulting in a
RevPar increase of more than
5%. Leisure sector business in
particular should be good; there
is very healthy demand every year during the Ad-
vent weekends. This year, even the fourth week-
end of Advent is set to be very popular because it
is well before Christmas Eve, which this year falls
on a Wednesday. The first two business weeks are
also looking better than expected, and it could well
be that the extra business day before Christmas
Fig.2: Trendbarometer Cologne/Bonn 2014 – Trend versus last year
2,9%
0,0%
5,5%
2,4%
-0,9%
6,9%
5,4%
-0,9%
12,8%
December
January
February
Last Year
Occ ADR RevPAR
Source: Fairmas GmbH / Data as of 05.12.2014
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Eve will have a positive effect on the accounts.
Christmas market tourism is booming, and New
Year‘s Eve is very promising. In Cologne and Bonn,
hoteliers are looking towards the end of the year
with optimism.
Cologne/Bonn expects a slow start to the New
Year. January is predicted to be slightly down. Oc-
cupancy is set to stagnate (0.0%), while room rates
and hence RevPar will decline by 1%. There was
no “ISM” this January (the next one will be held on
1 to 4 February 2015). The nights with the greatest
demand in 2015 are in February, while this year, the
trade fair took place in January (26 to 29 January
2014). The “imm cologne” (19 to 25 January 2015)
is already sold out in many hotels. The “Living Kit-
chen” event is also scheduled for the same period.
So far, bookings in the first week of January are
still very poor. Many hotels are
trying to attract leisure sector
guests to the city by offering
low room rates.
However, forecasts for Febru-
ary are very good. A 6% im-
provement in occupancy and
a 7% growth in room rates will
lead to an expected 13% Re-
vPar increase. As mentioned
above, this year’s IMM falls
entirely in February, which will ensure significant
growth in room rate and occupancy. But in 2015,
the whole of the Carnival period falls in February.
This traditionally ensures good business in the city
and lets the hoteliers be confident in their predic-
tions.
Dresden
The hoteliers in Dresden are again more confident
about the December performance. A 2% growth
in occupancy is thought likely and room rates are
expected to grow by as much as 3%, leading to a
5% rise in RevPar. As the fourth Advent weekend is
so close to Christmas, it will be difficult to sell it to
leisure-sector customers but this year it is in great
demand and even partially booked out. Hotels will
be adjusting their room rates upwards. New Year‘s
Eve is also looking good for Dresden, as is the tra-
Fig.3: Trendbarometer Dresden 2014 – Trend versus last year
1,6%
7,0%
7,0%
3,3%
0,1%
-0,3%
4,9%
7,2%
6,6%
December
January
February
Last Year
Occ ADR RevPAR
Source: Fairmas GmbH / Data as of 05.12.2014
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dition. Hoteliers are tightening the price screw, so
that room rates for the Advent weekends are signi-
ficantly higher than in recent years. However, while
this may be partly at the expense of occupancy,
the outlook for average room rates remains posi-
tive. Besides this, the Dresden Marketing GmbH
is advertising much more actively this year than
in previous years, and the city’s hotels are clearly
noticing this.
Expectations for the start of the New Year in Dres-
den are very positive. Occupancy is predicted to
increase by 7%, though room rates will virtually
stagnate, with a tiny increase of just 0.1%. Thus,
a RevPar increase of 7% is anticipated in January.
Hoteliers expect healthy leisure-sector business in
January due to the employee-friendly timing of the
school holidays (using just one day of the annual
holiday allowance means an employee can have
five days off work), and the fact that the school ho-
lidays take up more of January than was the case
in 2014. In general, hoteliers in Dresden are cau-
tiously optimistic about the New Year.
This confidence is confirmed for February, too.
Although room rates will decrease slightly (down
0.3%), occupancy is set to increase by 7%, which
will also boost RevPar. There are no large congres-
ses or events in early 2015. January and Februa-
ry are classic low-season months in Dresden, yet
the local hoteliers are looking forward to growing
demand. The forecasts look better than last year.
However, no large increase in room rate is expec-
ted, because unlike in the pre-Christmas and New
Year period, leisure guests are unwilling to pay hig-
her room rates. In 2015, the Semper Opera Ball is
being held for the first time in February, which may
stimulate higher room rate business a little.
Dusseldorf
There are hardly any trade shows in Dusseldorf this
December. That was also the case at this time last
year. Nevertheless, hoteliers are expecting a 1%
decline in occupancy. Savings made by corporate
clients, as well as reduced demands in the meeting
and conference sector due to more stringent com-
pliance measures are increasingly having negative
effects on the Dusseldorf hotel trade. Leisure busi-
ness is increasingly short-term at the weekends,
hindering any accurate assessment. The slight
(1%) room rate increase was mainly due to this
year’s “Valve World Expo” trade show. It had been
held in the USA last year. Experience shows that
the first three weeks of December are business
weeks that are easy to sell. Above all, there is usu-
ally good demand over the weekends in the run-up
to Christmas, so that occupancy and room rates
might well rise as leisure bookings in particular are
made at very short notice.
So far, January also seems set to be a troubled
month for hoteliers in Dusseldorf, with RevPar
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down by 6%. As a result, many
Düsseldorf hotels are recording a
major fall in the volume of mee-
ting and business overnights
(Occ: -1%). The first week of
January in particular is poorly
booked so far, because 6 Ja-
nuary 2015 is a public holiday in
some of Germany’s federal sta-
tes. A more specific statement
on the January forecast can be
expected from mid-November
onwards. An improvement in oc-
cupancy and room rates due to short-term corpo-
rate bookings can also be expected, because up
to now, the booking situation is still very subdued
and many corporate customers are simply keeping
their inquiries as options.
February does not promise any improvement, eit-
her. An overall RevPar decline of 38% is expec-
ted, mainly due to an extremely bleak room rate
forecast (down by 29%). Due to the absence of
the “Euroshop” trade fair (held every three years),
February 2015 will not be as successful as the
same month in 2014. The preliminary booking situ-
ation is also very poor. Add to this the fact that the
2014 Carnival took place in the first week of March,
which will not be the case in 2015 (the next one will
be in mid-February) and it all means that the hote-
liers in Dusseldorf will be missing a whole week of
corporate sales in February.
Frankfurt
Compared to last year, forecasts for this December
are very gloomy indeed. Occupancy is expected
to decline by 10%, though room rates will rise by
3%. A 7% decline in RevPar is thus expected. Last
year, the “EuroMold” event took place in Decem-
ber, trade fair days that will be missing this year. So
far, preliminary bookings in the leisure and events
sectors are good but volume is still short in the
individual segments. Yet even if the bookings for
Christmas and New Year soon pick up, the figures
could still turn out to be clearly positive, because
the development of room rates not least depends
on individual pickup, something which is currently
very difficult to estimate. Group business is expec-
ted along with the Christmas market tourism. In
addition, the last three weeks before Christmas are
likely to be business weeks which will be easy to
sell. In addition, the Lufthansa strike in December
Fig.4: Trendbarometer Dusseldorf 2014 – Trend versus last year
-1,3%
-0,5%
-12,7%
1,2%
-5,5%
-29,2%
-0,1%
-6,0%
-38,2%
December
January
February
Last Year
Occ ADR RevPAR
Source: Fairmas GmbH / Data as of 05.12.2014
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may generate additional lay-over trade for some
hotels.
The forecast for January is also less optimistic than
last year’s, largely because of the negative occu-
pancy trend (down 5%). This time, the Christmas
holidays in many federal states are up to three
days longer than in 2014, which will lead to a dec-
line in corporate and conference business in 2015.
In addition, the absence of “Paperworld” in Janua-
ry means two full trade fair days fewer in February
2015. Last year the entire event fell within January.
The steady growth in hotel openings in Frankfurt
is leading to cut-throat competition among hotels;
this is becoming particularly noticeable in the win-
ter months due to the lower room rate levels com-
pared to last year.
Forecasts for February suggest
no improvement. So far, there
is likely to be an overall Rev-
Par decline of 1.2%, despite a
positive room rate projection
(up 1%). Here too, the prelimi-
nary booking position fails to
reveal very much. In addition,
two events that were held at the
trade-fair site in February 2014
will be missing in 2015 (“Art &
Antique” and “Facility Manage-
ment”). This year, Carnival falls entirely in February
(last year it was held at the end of February and
beginning of March). Due to the Ambiente trade
fair (held every two years), which held in parallel, it
is hoped that little corporate business will be lost
during the month. It is generally assumed that Fe-
bruary will still develop positively and yet it is so far
difficult to assess whether the levels of 2014 will be
maintained.
Hamburg
December also looks likely to be an extremely
promising one in Hamburg. Increases in all three
key indicators are expected: occupancy is set to
rise by 3% and room rates by 2%, leading to a
5% growth in RevPar. In Hamburg, there are still
three more full business weeks before Christmas.
Fig.5: Trendbarometer Frankfurt 2014 – Trend versus last year
-10,3%
-4,8%
-2,2%
3,4%
0,9%
1,0%
-7,2%
-3,9%
-1,2%
December
January
February
Last Year
Occ ADR RevPAR
Source: Fairmas GmbH / Data as of 05.12.2014
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The 14th Congress of the German Interdisciplina-
ry Association for Intensive Care and Emergency
Medicine has so far already generated strong de-
mand in the first week of December. Demand at
the Advent weekends is also good, especially in
the group travel sector, which explains the positive
occupancy outlook. New Year‘s Eve is also ideal
for leisure travellers this time around. The hoteli-
ers in Hamburg are looking towards the end of the
year with confidence, although here too, bookings
are being made at short notice.
There is also confidence about all three key indi-
cators in January: Occ: up by 4%, ADR: up 3%,
and RevPar 7% higher. With regard to the room ra-
tes forecast, many hoteliers are already registering
very good advance booking levels in response to
a number of events, as well as a significant growth
in demand in the MICE sector. In January 2015,
Hamburg hoteliers are expec-
ting improved short-term boo-
king inquiries for annual kick-off
events and tourist trips.
February continues to promise
strong growth, mainly due to the
very positive room rates outlook
(up 5%) due to an increase of
more than 6% in RevPar. The
reason for this positive forecast,
according to many hoteliers, is
the already intense demand in the MICE and indi-
vidual tourism sectors. Many smaller events and
congresses are taking place next year, like the
“Reisen Hamburg“ travel show or the Congress of
Christian Leaders, which will be responsible for the
increase in room rates.
Munich
Forecasts for December in Munich are still restrai-
ned. A slight (0.6%) decline in occupancy is expec-
ted, as well as a fall in room rates by 0.5%. This
means RevPar will decline by 1%. December con-
tains three full business weeks, which could mean
many guests paying high room rates, especially as
the third week of Advent is a relatively long time be-
fore Christmas. There will be no trade fairs or other
major events in December. Individual bookings are
made at a late stage. It remains to be seen whether
there will still be room for improvement, but busi-
Fig.6: Trendbarometer Hamburg 2014 – Trend versus last year
2,7%
3,5%
1,8%
2,4%
3,0%
4,5%
5,2%
6,6%
6,4%
December
January
February
Last Year
Occ ADR RevPAR
Source: Fairmas GmbH / Data as of 05.12.2014
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ness at Christmas and New Year will be far worse
than last year in many hotels.
January 2015 in Munich is expected to be much
better than the first month of 2014 (Occ: +3%,
ADR: +18%, and RevPar: +21%). The main reason
for this encouraging development is the BAU trade
fair, which takes place every two years (19 to 24
January 2015) and regularly ensures healthy rates.
The public holiday on 6 January 2015 (Epiphany)
will have a negative effect on business sector trade
and, in turn, on occupancy and
room rates in the first week.
However, even if one allows for
the low ADR associated with lei-
sure sector business, this only
serves to reinforce the enor-
mous positive impact that the
“BAU” event has on room rates
and RevPar.
Also in February, hoteliers are
looking forward to a stronger
performance than last year. Increases in occup-
ancy (3%), room rates (12%) and thus in RevPar
(16%) are expected. The main reason for this is
the ISPO trade event (5 to 8 February 2015) which
otherwise takes place in January. The Munich Se-
curity Conference is being held at the same time
(6 to 8 February 2015). In addition, February 2014
was an exceptionally weak month in many ho-
tels compared to the last few years, particularly
in terms of occupancy. However, hoteliers expect
that this will move into the black in 2015.
Fig.7: Trendbarometer Munich 2014 – Trend versus last year
-0,6%
3,3%
3,2%
-0,5%
17,5%
12,1%
-1,1%
21,4%
15,8%
December
January
February
Last Year
Occ ADR RevPAR
Source: Fairmas GmbH / Data as of 05.12.2014
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In Focus
Correlation of the overall economic development in relation to the supply and
demand trends in the hotel industry and the industry’s economic efficiency
Background
The systematization of the hotel industry in the 1980s was followed by the growth (real-estate boom) of the
nineties and the “noughties”. The growth of the hotel industry in Germany is organic and opportunistic. The
country’s federal structures are the core of the economic development of the accommodation markets.
Derived from this, location decisions (in particular those of the system hotel trade) can be classified more
as „safeguarding strategic locations“ and less as „economically rational growth“.
Based on these considerations, the following questions need to be asked:
• Are growth strategies to clean-up the hotel and location portfolio of system hoteliers such as Dorint
AG, based on capital investment grants (rent subsidy and construction cost subsidy) still useful from an
economic point of view?
• Is the economic power (i.e. demand) of a country where the focus is on the secondary sector the driver
behind occupancy for the hotel industry or is the hotel industry self-supporting as a part of the „tourism“
sector of the economy?
The research question for Germany arising from this consideration and discussion is this: Is the hotel indus-
try in Germany, with its fragmentary structure, an independent economic driving force (Germany is a tourist
country) or is it directly related to the economic strength of the country’s core industries?
The key industry in a country is defined as the central economic force primarily providing employment in
that country and which in turn defines economic growth and thus GDP.
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Based on these questions, on the one hand resulting from the question of the correlation of the hotel in-
dustry to a country’s economic strength, and on the other from the general economy’s key indicators, can
profitable investments in hotels constitute the development of a location? If “yes”, are these sustainable
locations for profitable hotelier activities for both operators and investors?
The thesis is that a positive relationship exists between the „economic power“ of a region and the „eco-
nomic success“ of a hotel, and the „independent economic strength of the hotel operation“ is secondary
to the overall economic success. Here, overall economic success is based on the sustained economic
livelihood of the operator and the expected rate of return for the investor, in other words the property owner.
In this perspective, the separation of real estate and operation (as a principal understanding of the different
risk and target model) is a prerequisite.
The analysis for Germany
The correlation analyses of the economic factors in Germany relate to the gross value added and the
gross domestic product, as well as business taxes. The measurable quantities in the hotel industry are the
demand-relevant factors of overnight stays and the turnovers achieved, and room rates occupancy and
revenue (= performance values), as well as supply factors of available the available operations and beds.
The results of these relation analyses show that:
• There is a high correlation between the gross domestic product (GDP) and the number of overnight
stays in hotels,
• A positive correlation was determined between the gross value added (GVA) and demand (hotel over-
nights), while
• Business tax revenue is positive in relation to the number of overnight stays.
The latter aspect is a purely location-dependent factor. Since the advent of globalization, tax-optimizing
international business models can be created that lead to a low or even zero tax burden in Germany by
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means of appropriate profit withdrawals. From the positive relationship between trade tax revenues and
overnights, it can be concluded that the structure of the hotel industry in Germany is still fragmentary, small
structured, and thus overwhelmingly in private hands.
In the correlation analysis, the approach of verification and investigation of a market niche via a supply ana-
lysis based on population size that is commonly practiced by consultants, investors, financiers (banks) is
classified ad absurdum, particularly for such cities as Munich and Berlin. The bed density determined here
is irrelevant for an economic assessment of „demand“ and „existing and potential supply“.
Deeper analysis of Berlin and Munich in terms of a location survey also reaches (in the case of Berlin) the
additional conclusion that this is a distinctive tourist location, and the that correlation of employees and
trade tax is a positive one at this location. The last two factors were only found to be modest where Munich
is concerned.
Based on the thesis, the analysis permitted one preliminary conclusion: The supply-side derivation of ca-
pacity gaps (sleeping accommodation) at a location has a positive relation to the economic factors of GDP
and GVA for Germany, though not to the levels of workforce and business taxes! The theory so derived
from these correlation analyses can thus be confirmed. The theory is confirmed that GDP and GVA are
trend instruments and serve as indicators for determining the economic success factor for a hotel when
selecting the location.
The interpretation for investors
For investors, the locations must be distinguished in terms of investment and asset management costs
in the context of a comprehensive portfolio property real estate strategy for German real estate. The in-
vestment volume makes demands on the total capital available and/or that derived from the expectations
of the return on equity that can be achieved. On the other hand, the asset management costs should be
considered in terms of the property owner’s support and maintenance costs.
For investors (and in a wider sense, for operators) this correlation analysis shows that location potentials for
the expansion or development of hotel locations in the multipolar hotel market must be sought at those lo-
cations and destinations where economically stable development and a low fluctuation of economic deve-
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lopment exist. When this is examined from the perspective of system hotels, private hotels face cut-throat
competition due to the expected economies of scale that aid system hoteliers, primarily franchises. On
the other hand, from the investor’s perspective, this is a regional orientation of an operator with a national
„brand”. From the perspective of the investors, this is because their investment interest in the German hotel
market is primarily focused on major cities. The same applies to the system operators who are searching
for economies of scale on their own (ownership and leases), based on risk diversification and risk behaviour.
Regional or even local hotel developments are based on the distinct individual interests of the local investor,
through which the operator will achieve economies of scale with a „local operator“ and a franchise.
There is thus a location conflict of the „major cities“ as the primary investment field in relation to the high
investment costs, the lower asset management costs and the high readiness of international system chains
to make an obligation to guarantee the overall return on investment (risk minimization) to a greater expected
range of economic variation. This level of fluctuation is high at such locations and among other things; it is
dependent on international economic forces, which in turn influence travel and demand behaviour. Loca-
tions that have an economically high stability and, according to the survey, particularly in the medium-sized
and smaller towns and cities or even in distinct regionally fragmented structures, are a sustainable econo-
mic investment and have a relatively lower risk of failure, both for operators and property owners.
Institutional investors and system operators are not interested in a comprehensive investment model be-
cause of the expected small size of the development at lower operating variables, since the effort to de-
velop (including the development of the location) is the same, regardless of the size of the company and
the location. This means that local and regional investors have to be found, even at the regional locations,
and they need to coordinate with a regional operator in turn. The system hotel trade is happily available
for franchise models. The development costs for a member of a chain are the lowest of all business and
operator models.
Conclusion for Germany:
From this situation, it can be deduced that the hotel industry is a supplier to Germany’s economic drivers
(i.e. the automobile and mechanical engineering industries, consulting and auditing, as well as the education
and training sectors) and that the divergent interests of operators and investors do not correspond with the
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economically regional structures (federal economic centres). The previous indicators for the development of
economically stable system hotels in major cities do not reflect the potential of the regions (high economic
strength with only slight fluctuations). The hotel industry in Germany is not a separate touristic economic
driver. Instead, it is dependent on the development of the economy as a whole. From the real estate per-
spective, investments in hotels in regions with low GDP fluctuation are thus the most economically stable!
Summary:
The development of new locations cannot be carried out with the usual indicators of arrivals, overnight
stays and bed density as the sole means of assessment. Rather, the analysis of the factors related to de-
mand and supply must be re-considered in detail, in order to create an „economic sustainability factor“ that
will permit a secure and stable yield. Unfortunately, this model is not yet sufficient to determine a credit fac-
tor among investors and financiers that can be applied for the benefit of small and medium-sized operators.
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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.