hotel report stockholm

Hotel report StockholmEvaluation of the future need for hotels in Stockholm

The Swedish Tourism Research Institute

on behalf of

Stockholm Business Region Development

2

BackgroundThe City Executive Board of Stockholm has decided that all existing hotel capacity and future hotel expansion in Stockholm should be accounted for regularly. The city of Stockholm has previously ordered a series of reports called RB/S and the latest version was published in March 2009. These reports describe the existing hotel capacity and map out future hotel establishments in Stockholm municipality.

Now, the city of Stockholm is interested in expanding the content of the RB/S report series with a prognosis of the future demand for hotel rooms between 2010-2015. The new report also includes two separate qualitative studies that evaluate the expected effects of budget hotels and Stockholm’s need for a various range of hotels.

This report is produced by The Swedish Tourism Research Institute (TUI) on behalf of Stockholm Business Region Development (SBRD).

3

PurposeThe purpose of the report is to give the city of Stockholm input for assessing the future need of hotels in Stockholm. The report consists of five parts:

1. Stockholm’s hotel market - the current hotel capacity in Stockholm 2. Future hotel expansion in Stockholm3. Demand prognosis for hotels, youth hostels and camping grounds for

the period 2010-20154. A study of how the range of budget hotels have affected three

European destinations5. An interview study regarding the need for hotels in Stockholm

4

Budget hotels

There is no definition of budget hotels but usually it is referred to hotels with 2 stars or less. Although price play the most important role in settling whether or not it is a budget hotel.

Budget hotels are a form of hotel accommodation that offer rooms to a significantly lower price level than the general price level on the destination. Budget hotels do not necessarily have a lower standard than full service hotels but are often distinguished by their lower service level.

Part 1: Stockholm’s hotel market Presentation and analysis of the current hotel capacity in Stockholm

6

About Stockholm’s hotel market

Part 1 ”Stockholm’s hotel market” accounts for all hotels in Stockholm municipality. Based on geographic location and classification of the hotels a presentation is made of the current supply of hotels.

The information in this section of the report is based on secondary sources such as the previous reports RB/S and Statistics Sweden (SCB) tourism statistics.

7

Hotels and youth hostels in Stockholm 1999-2008

* In 2002 some hotels were redefined as youth hostels

Source: SCB, SHR, RB/S

1999 2000 2001 2002* 2003 2004 2005 2006 2007 2008

Available hotel rooms 10 500 10 600 11 500 11 400 12 600 12 900 13 000 13 400 13 900 14 900

Number of sold hotel rooms (thousands)

2 766 2 868 2 887 2 754 2 806 3 010 3 179 3 395 3 601 3 803

Guest nights hotels (thousands) 3 828 3 963 3 997 3 895 4 036 4 314 4 586 4 929 5 211 5 533

Occupation rate hotel rooms 72,2% 73,6% 69,0% 65,9% 61,1% 63,6% 66,8% 69,3% 70,8% 69,8%

RevPAR hotels 656 sek

699 sek

715 sek

703 sek

604 sek

599 sek

651 sek

700 sek

779 sek

805 sek

Guest nights youth hostels (thousands)

196 198 207 300 299 349 416 419 450 541

8

Stockholm’s hotel market 20092009 Change 2008-2009

Number of hotels 133 +5

Number of hotel rooms 15 700 +800

Number of hotel beds 30 000 +1 500

Number of hotel guest nights January-July 2009 3 208 917 +3,2%

Number of sold hotel rooms January-July 2009 2 090 154 -2,1%

Average room occupancy January-July 2009 64% -3 %-points

RevPAR January-July 2009 698 SEK -8%

Number of youth hostels 24 +2

Number of youth hostel beds 2 500 + 330

Number of youth hostel guest nights January-July 2009

319 169 9,1%

9

About hotel classificationSince 2003 The Swedish Hotel and Restaurant Association (SHR) has been classifying their hotels based on 130 different criteria. The Swedish classification system is voluntary and, shortly summarized, these are the requirements for each star rating:

communal toilet and bath for at least 10% of the rooms, central heating, breakfast.

en-suite toilet/bathroom in at least 40% of the rooms, refreshments available for purchase.

en-suite toilet/bathroom, telephone and TV in all rooms, access to guest PC, hotel staffed during daytime, lift/elevator, non-smoking rooms.

restaurant with waiter service, minibar/room service, hotel staffed 24 hours a day, international TV-channels, internet connection in all rooms, photocopying facilities, laundry service, certain interior design requirements.

à la carte restaurant, pool and/or staffed gym and/or staffed sauna/relaxation area, air conditioning, safety deposit box in all rooms, generally exclusive interior, suites.

Source: SHR

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About hotel classification, 2Out of 133 hotels in Stockholm, 55 have chosen not to be a part of the classification system. That is approximately 40% of the hotels in Stockholm. Some of the bigger hotel chains, like Scandic Hotels and First Hotels, are among those that are not classified according to the SHR system.

When describing the hotel market in Stockholm TUI has rated the hotels who chose not to be a part of the SHR system.

Source: SHR

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City districts

B = Bromma SN = SkarpnäckEÅV = Enskede/Årsta/Vantör SH = SkärholmenF = Farsta ST = Spånga/TenstaHL = Hägersten/Liljeholmen Ä = ÄlvsjöHV = Hässelby/VällingbyRK = Rinkeby/Kista

When presenting the hotels in Stockholm the municipality has been divided into ”Peripheral Stockholm” and ”Stockholm inner city”. ”Peripheral Stockholm” consists of the city districts Bromma, Enskede/Årsta/Vantör, Farsta, Hägesten/Liljeholmen, Hässelby/ Vällingby, Rinkeby/Kista, Skarpnäck, Skärholmen, Spånga/Tensta and Älvsjö. “Stockholm inner city” consists of Kungsholmen, Norrmalm, Södermalm and Östermalm.

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Hotels in Peripheral StockholmHotel Number of

roomsStar rating

Area

First Hotel Royal Star 103 4 Ä

Rica Talk Hotel 248 4 Ä

Ulfsunda Slott 54 4 B

Best Western Amani Hotel 104 3 EÅV

Connect Hotel Stockholm 60 3 Ä

Farsta Strand Hotel & Conference

68 3F

Flyghotellet 66 3 B

Hotell Attaché 63 3 HL

Hotell Ta Inn 40 3 F

Hotell Västberga 95 3 HL

Hotell Älvsjö 36 3 Ä

Ibis Hotel Stockholm-Hägersten 190 3 HL

Ibis Hotel Stockholm-Kista 87 3 RK

Maude´s Hotell 42 3 EÅV

Mornington Hotel Bromma 217 3 B

New World Hotel 116 3 EÅV

Riddersviks Gård 24 3 HV

Quick Sleep Stockhom 35 1 Ä

Akalla Hotel Apartments 56 n.a. RK

Hotel Formule 1 104 n.a. HL

Hotel Number of rooms

Star rating

Area

Hotell Pilgrimshem 35 n.a. B

Hässelby Slott 67 n.a. HV

Ibis Hotel Stockholm-Spånga 52 n.a. ST

Ljunglöfska slottet 29 n.a. B

Memory Hotel 155 n.a. RK

Memory Hotel Apartments 37 n.a. RK

Mr Chip Hotel 150 n.a. RK

Quality Hotel Globe 329 n.a. EÅV

Quality Hotel Prince Philip 208 n.a. SH

Sabima Hotel 17 n.a. B

Scandic Alvik 325 n.a. B

Scandic Bromma 144 n.a. B

Stay At Bromma 182 n.a. B

Stay At Kista 166 n.a. RK

Villa Årsta Lägenhetshotell 27 n.a. EÅV

Åkeshofs slott 23 n.a. B

Total 3 754

Source: SCB, SHR, RB/S,

accommodation facilities

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Not classified

1 or 2 stars

3 stars

4 stars

5 stars

Map of hotels in Peripheral Stockholm

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The supply of hotels in Peripheral Stockholm

3 754 of the approximately 15 700 hotel rooms in Stockholm are located in the peripheral. That is equivalent to 23% of the hotel rooms in the municipality. These rooms are concentrated to areas that mainly attract business travellers; Älvsjö, Årsta, Bromma and Kista.

When looking at the classified hotels, the 3 star hotels are dominant. The hotels in the periheral of Stockholm are mainly middle class hotels attracting business travellers or conference hotels.

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Stockholm inner city

In Stockholm inner city, two hotel groupings have been defined previously; Vasagatan (VG) and Central Business District (CBD). These groupings mainly include the big business hotels that are located along Vasagatan next to the central train station and in the southern parts of Norrmalm.

CBDVG

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Hotels in Stockholm inner city – 5 and 4 stars

Hotel Number of rooms Area

Grand Hotel 368 CBD

Hilton Stockholm Slussen 289 I

Radisson SAS Royal Viking Hotel 459 VG

Radisson SAS Strand Hotel 152 CBD

Sheraton Stockholm Hotel & Towers 465 VG

Totalt 1 733

stars


Berns Hotel 65 CBD

Best Western Hotel Terminus 155 VG

Best Western Hotel kung Carl 134 CBD

Best Western Time Hotel 144 I

Clarion Collection Hotel Karlaplan 85 I

Clarion Collection Hotel Wellington 60 I

Elite Hotel Arcadia 88 I

Elite Hotel Stockholm Plaza 143 CBD

Elite Palace Hotel 215 I

Freys Hotel 124 VG

Hotel Esplanade 34 CBD

stars

Hotel Number of rooms

Area

Hotel Hellsten 78 I

Hotel Rival 99 I

Hotel Stureplan 101 CBD

Hotel Victory 45 I

Hotell Birger Jarl 235 I

Hotell Diplomat 129 CBD

Hotell Stallmästaregården 49 I

Lady Hamilton Hotel 34 I

Mornington Hotel Stockholm 215 I

Nordic Light Hotel 175 VG

Nordic Sea Hotel 367 VG

Rica Hotel Kungsgatan 269 CBD

Rica Hotel Stockholm 292 CBD

Villa Källhagen 36 I

Total 3 371

CBD=Central Business District

VG=Vasagatan

I= other parts of the inner city

Source: SCB, SHR, RB/S, accommodation

facilities

17

Hotels in Stockholm inner city – 3, 2 och 1stars


Acapulco lägenhetshotell 37 I

Adlon Hotel 93 VG

Alexandra Hotel 69 I

Best Western Kom Hotel 136 I

Columbus Hotel 40 I

Crystal Plaza Hotel 111 CBD

Hotel Bentleys 67 I

Hotel Gustav Vasa 41 I

Hotel Oden 138 I

Hotel Tegnérlunden 101 I

Hotell Anno 1647 29 I

Hotell August Strindberg 27 I

Hotell Lilla Rådmannen 36 I

Hotell Långholmen 102 I

Hotell Zinkensdamm 89 I

Hotell Örnsköld 27 I

Lord Nelson Hotel 29 I

Mälardrottningen 60 I

Queens Hotel 53 I

Rex Hotel 56 I

Rica Hotel Gamla Stan 51 I

stars


Värdshuset Clas På Hörnet 10 I

Total 1 402

stars


Colonial Hotel 31 I

Hotel Hansson 39 I

Hotell Bakfickan 26 I

Hotell Bema 12 I

Rex Petit 16 I

STF Vandrarhem Fridhemsplan 142 I

Vanadis Hotel & Bad 67 I

Total 333

stjärna


Hotel Micro 31 I

Total 31


VG=Vasagatan


Source: SCB, SHR, RB/S, accommodation facilities

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Hotels in Stockholm inner city – unclassifiedHotel Number of rooms Area

A & BE Hotel 12 I

Aldoria Hotel 21 I

Art Hotel 31 I

Central hotel (Profil hotels) 93 VG

Clarion Collection Hotel Tapto 117 I

Clarion Hotel Sign 558 VG

Clarion Hotel Stockholm 532 I

Comfort Hotel Stockholm 163 VG

Den röda båten 5 I

Ersta Konferens och Hotell 22 I

First Hotel Amaranten 461 I

First Hotel Reisen 144 I

Hotel Haga Kristineberg 90 I

Hotel Renstierna 10 I

Hotel Riddargatan 78 CBD

Hotel Tre Små Rum 7 I

Hotell Norrtull 129 I

Loginn Hotel 40 I

Lydmar Hotel 46 CBD

Pensionat Oden City 15 I


Pensionat Oden Södermalm 5 I

Pensionat Oden Vasastan 8 I

Pärlan Hotell 9 I

Scandic Anglais 230 CBD

Scandic Ariadne 283 I

Scandic Continental 268 VG

Scandic Hasselbacken 112 I

Scandic Malmen 327 I

Scandic Norra Bantorget 181 I

Scandic Park 198 I

Scandic Sergel Plaza 403 CBD

Scandic Sjöfartshotellet 212 I

Stay At Lindhagen 143 I

Wenner-Gren Center 9 I

Story Hotel 82 CBD

Stureparkens gästvåning 10 I

Wasa Park Hotel 15 I

Total 5 069


VG=Vasagatan


Source: SCB, SHR, RB/S, accommodation facilities

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Map of hotels in Stockholm inner city

Non classified

1 or 2 stars

3 stars

4 stars

5 stars

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New hotels January – June 2009

Hotel Area Opened Number of

rooms

Number of

stars

Hotell Bakfickan I Feb 09 26 2

Stay At Lindhagen I Mar 09 143 n.a

Story Hotel CBD Mar 09 82 n.a

• All three hotels that opened in the first half of 2009 are located in Stockholm inner city.

• The largest hotel to open was Stay At Lindhagen located at Kungsholmen with 143 rooms/apartments.

• During the first half of 2009 the room capacity (number of available hotel rooms) in Stockholm inner city increased by 2,3%. The total increase for Stockholm municipality was 1,3 %.

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Breakdown of hotel rooms by SHR star rating system and TUI’s estimation

1 733

3 776

2 610

399

144

3 805

2 845

381

0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000

5 stars

4 stars

3 stars

1-2 stars

Source: Blue bars = SHR classification, grey bars = TUI’s estimation of star

rating.

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Occupancy rate hotel rooms 1999-2008

72% 74%69%

66%61%

64%67% 69% 71% 70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: SCB and Tillväxtverket

23

Occupied hotel rooms per month

0%

20%

40%

60%

80%

100%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006

2007

2008


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Breakdown of occupied rooms by tourist grouping 2008

60%

7% 9%

24%

0%

20%

40%

60%

80%

business

travellers

conference

guests

leisure travellers groups


Business travellers: guest paying full price. Conference guests: guests who live and confer on same hotelLeisure travellers: Guests who don’t pay full price and mainly travel on weekends and summer. Also full payingguests at tourist hotels. Groups: guests who have booked and paid as group.

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RevPar Stockholm hotels

656 kr 699 kr 715 kr 703 kr604 kr 599 kr

651 kr700 kr

779 kr 805 kr

0 kr

200 kr

400 kr

600 kr

800 kr

1 000 kr

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

In Swedish crowns


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Evaluation of Stockholm’s hotel capacity

• Stockholm’s hotel capacity mainly consists of 3- or 4-star hotels. More than 80% of all available rooms in Stockholm are considered to be of 3- or 4-star standard.

• The range of hotel rooms with 1 or 2 stars is limited and only represent 5% of the available capacity.

• The business segment (business travellers and conference guests) dominate the hotel market in Stockholm and they occupy two thirds of the hotel rooms. The business segment has primarily driven the hotel development in Stockholm. Business travellers are less price sensitive than leisure travellers and they demand higher standard and better service, which has affected the current hotel supply.

• The market for meetings (MICE) being a prioritized market in Stockholm has also affected the supply of hotels.

• The hotels are getting bigger and bigger and since the year 2000 some of the biggest hotels in Stockholm have opened, like Clarion Hotel Sign, Nordic Hotels, Scandic Alvik and Rica Talk Hotel.

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Evaluation of Stockholm’s hotel capacity, 2

• The hotels in “Stockholm inner city” are mainly located in the previously defined areas CDB and VG.

• It is in these parts of the inner city that some of the biggest hotels are located, like Sheraton Hotel Stockholm, Radisson SAS Royal Viking Hotel, Scandic Sergel Plaza Hotel, Grand Hotel and Nordic Hotels.

• Location is an important factor for the hotels. The hotels aimed at business travellers with an attractive location near VG or CBD have a higher occupancy rate.

Part 2: Future hotel expansionsPresentation of all future hotel expansions and new hotel establishments

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About Future hotel expansions

Part 2 accounts for future hotel expansions and new hotel establishments in Stockholm.

The information is collected from current material possessed by e.g. Stockholm Exploitation Office, SBRD, SHR and Restauratören.

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Planned hotel expansionHotel Part of city Area Opens Number of rooms

Hotell Skeppsholmen Norrmalm I Oct 09 81

Botrygg Företagshotell Södermalm I 2010 125

Courtyard by Marriott Kungsholmen I 2010 272

Nobis Hotel Stockholm Norrmalm CBD 2010 205

Park Inn Hammarby Sjöstad Södermalm I 2010 177

Park Inn Stockholm Waterfront Norrmalm VG 2010 418

STF City Norrmalm CBD 2010 i.u.

Klockan Norrmalm VG 2011 390

Scandic Kista Rinkeby-Kista Y 2011 400

Stallmästaregården (expansion) Norrmalm I 2011 25

Stay At Frihamnen Östermalm I n.a 174

Total number of new rooms 2 267

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Uncertain hotel projects

Hotel Part of city Area Number of rooms

Clarion Hotel Stockholm (expansion) Södermalm I 100

Karlsboda Hotel Bromma Y 50

Liljeholmen Hägersten-Liljeholmen

Y 230

Memory Hotel (expansion) Rinkeby-Kista Y 150

Choice Hotel i.u i.u 300

Choice Hotel i.u i.u 300

Slussen Södermalm I 95

Solvalla Bromma Y i.u

Sturegallerian Östermalm CBD i.u

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Planned hotel projects

Uncertain hotel projects

Map of future hotel projects in Stockholm

33

Evaluation of future hotel projects• As a result of the current recession some hotel projects has been

deferred into the future.• Stay At Frihamnen would have opened in 2009, but has been postponed.

Memory Hotel in Kista had previous plans to expand by 150 rooms but it has also been delayed.

• If all planned hotel projects where to open before 2012, it would mean an increase in Stockholm’s room capacity by 11%. This corresponds to an annual increase of room capacity by 3,6% which means that the growth rate of new hotel rooms has declined slightly compared to the last decade.

Part 3 Prognosis 2010-2015Prognosis of the hotel, youth hostel and camping demand in Stockholm for the period 2010-2015

35

About prognosis 2010-2015In order to estimate the future need for hotel rooms in Stockholm it is of great importance to know how big the demand will be in the future. With a high proportion of business travellers to Stockholm the hotel market is easily affected by recessions and booms in the economy. A comparison of the number of rooms sold in Stockholm since 1980 shows that it has followed the business cycle. To asses the overall demand for accommodation in Stockholm we have also considered other forms of accommodation like youth hostels and camping grounds. Since forecasts are based on expectations there is always some level of uncertainty in them and the further ahead you look, the greater the uncertainty. When predicting a longer period of time you can mainly rely on long term trends like expected business cycles.

36

Comparison of guest nights and GDP development in Sweden 1980-2008

-15%

-10%

-5%

0%

5%

10%

15%

20%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

guest nights

GDP

Source: SCB och Tillväxtverket

37

Historic hotel development in Stockholm - hotel room capacity

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008


38

Historic hotel development in Stockholm - number of sold rooms

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

4 000 000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008


39

Historic hotel development in Stockholm - hotel guest nights

0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008


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About the hotel development so far• Between1980 and 2008 the number of guest nights in Stockholm has increased by almost 3,5

million. The number of guest nights has increased by 166% since 1980 which is equivalent to an annual growth rate of 3,6%, a higher growth rate than Sweden in total at 2,5%.

• During the same period the number of room sold increased by 154%, an annual growth of approximately 3,3%.

• Despite the recession the number of guest nights in Stockholm hotels increased by 3,2% in January-July 2009 thanks to positive growth in leisure travel. Youth hostels present an even stronger increase of 9,1%. In contrast the number of hotel rooms sold decreased by 2,1% until July 2009 due to a reduced number of business travellers.

• The hotels in Stockholm have managed relatively well in terms of number of guest nights. An increase in leisure travel and a solid MICE market has to some extent compensated for fewer business travellers. However the hotels have been forced to cut prices, and in January-July 2009 RevPAR declined by 8% compared to the same period in 2008.

• Stockholm is a growth region. Since 1980 the population in Stockholm has increased by 25% to 810 000 inhabitants. The population in Stockholm has grown faster than Sweden in total, where the number of inhabitants increased by 11% in the corresponding period. A growing population in Stockholm lead to more businesses and services that attract both business and leisure travellers.

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Background prognosis 2010-2015The prognosis is based on the hotel’s historical growth rate. Adjustments have been made based on expected GDP development, expected growth in the Stockholm region and known events and investments that are expected to affect the tourism and hospitality industry in Stockholm.

Some examples of events that are thought to have an influence is the establishment of new arenas like the new National Arena, Stockholm Waterfront (with a meeting capacity of 2 000 people) and the development of “the Globe area”.

Other factors that TUI has taken into account is the growth of the number of new companies in Stockholm and the population growth. TUI has also considered long term effects of the current recession, mainly due to a possible decrease in business travels.

Internationally, an economic recovery is expected during the second half of 2010. However the upturn is expected to be relatively slow and prolonged.

42

Factors effecting the prognosis2010 Expected to be the best year ever for MICE. For example, the

biggest congress in Europe will be held at Stockholmsmässan. Business travel is expected to turn slowly upward in the second half of 2010. Leisure travel will continue to grow.

2011 Stockholm Waterfront has opened with a capacity of over 2 000 delegates. Business travels will continue to grow slowly.

2012 The National Arena will open. Planned projects in the Globe areaare expected to be completed. Strong economic growth with a GDP growth of 3%.

2013 Sweden is in an economic boom. Employment increases. Both business and leisure travel continue to grow. Strong GDP growthsof 3,8%.

2014-2015 Continued economic growth with an annual GDP growth over 3%.

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Prognosis number of sold rooms and guest nights 2010-2015

2010 2011 2012 2013 2014 2015

Prognosis sold hotel rooms

3 725 000 3 840 000 4 010 000 4 230 000 4 400 000 4 575 000

2010 2011 2012 2013 2014 2015

Prognosis hotel guest nights

5 730 000 5 960 000 6 230 000 6 540 000 6 800 000 7 080 000

Prognosis youth hostel and camping guest nights

780 000 820 000 860 000 900 000 940 000 970 000

Prognosis total number of guest nights

6 510 000 6 780 000 7 090 000 7 440 000 7 740 000 8 050 000

44

About TUI’s demand prognosis 2010-2015• During the years 2010-2015 GDP is expected to grow 2,5% annually. • The demand for hotel rooms is expected to grow by 3,7% annually

between 2010 and 2015. During the same period the demand for allforms of accommodation is expected to grow by an annual growth rate of 4,1%.

• Within the next few years new facilities and arenas in Stockholm will open which is expected to benefit both business and leisure tourism.

• In 2011 and 2012 the Swedish economy is expected to gain momentum, however, unemployment will remain high.

• In 2013 the unemployment rate is expected go down. It will then continue to decrease during both 2014 and 2015. The economy continues to grow and GDP increases by just over 3% annually.

• The number of international low cost airlines flying to Stockholm will increase.

45

Conclusions • During the forecast period, demand is expected to increase annually,

with a low increase during the first two years and then increase sharply from 2012 onwards.

• At the beginning of the forecast period the increase in demand is expected mainly to come from leisure travellers and MICE visitors. A recovery in business travel is most likely to happen during the second half of 2010 which will then affect the demand in 2011.

• From 2012 when GDP growth is strong the demand among all touristgroups is expected to grow.

• Despite stable economic growth from 2012 onwards the demand doesnot increase as strongly as in the recent economic boom. The reason is the uncertainty concerning travel restrictions and the impact it may have on future business travels. Many companies have cut their travel as a consequence of the recession and it may take some time before these travel restrictions will change despite an economic upturn.

Part 4 Budget hotels at three destinationsStudy of the effects of budget hotels at three destinations

47

Purpose of the study

By studying how other destinations are working to attract budget hotels and how the expansion of budget hotels have affected the destinations we can predict what Stockholm could expect from budget hotel establishments.

The three destinations included in this study were chosen by SBRD. The destinations were Amsterdam, Hamburg and Copenhagen. These cities were chosen on the account that they are all located in northern Europe and that they have similar conditions as Stockholm.

48

Survey structureWhat information to include in the study was decided together with SBRD. They survey was carried out via telephone interviews with representatives from the destination’s hotel market, tourism industry and also from the municipality. In Hamburg the information was collected through e-mail contact.

Hotel statistics from each destination was also collected. The data TUI gathered was hotel capacity, occupancy, seasonal variation and RevPAR.

First the results of the study is presented separately for each destination and then at the end of Part 4 a comparison of the destinations is made.

49

Interviewed personsThe interviewees were chosen based on their experience and knowledge of the hotel and tourism industry at the destination. The interviewees were identified partly through TUI’s networks like European Cities Marketing (ECM) and partly through SBRD’s network. The interviewees were not given any compensation for participating in the survey, but they were offered a copy of Part 4 in this report.

Amsterdam Hamburg Köpenhamn

Hans Dominicus, Amsterdam Tourism and Convention Bureau

Claudia Stahmer, Hamburg Tourismus Gmhb

Lars Ramme, Sales- & Marketing manager, Wonderful Copenhagen

Albert Roebersen, Director Corporate Operations, Accor Hospitality Amsterdam

Kristina Bohnenstengel, Hamburg Chamber of Commerce

Kim Lundberg, Business Development Manager, Copenhagen Capacity

René van Schie, Hotel Development Intermediary, Amsterdam city

Christopher Wegener, Hamburg Business Development Corporation

Benedikte Rosenbrinck, Research & Development, Horesta

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Destination Amsterdam

Amsterdam is the biggest city in The Netherlands with approximately 750 000 inhabitants. The city is first and foremost known for its canals, flower markets and museums. Both the van Gogh museum, the National museum and the house of Anne Frank each draw more than 1 millionvisitors every year.

Amsterdam mainly attract leisure travellers and is an attractive destination all year round. About one third of all business travellers in Amsterdam are MICE visitors, visiting the city for a conference or congress.

One of the largest hubs is located in Amsterdam with direct flights to many destinations within Europe and worldwide.

51

Hotel capacity Amsterdam• Amsterdam has approximately 20 000 hotel rooms with 43 000 hotel beds spread

over 357 hotels. • More than 60% of the hotels in Amsterdam are rated 3 or 4 stars.

Number of hotel rooms in each category

14%

32%

30%

10%

6%

7%

0% 5% 10% 15% 20% 25% 30% 35%

5 stars

4 stars

3 stars

2 stars

1 star

unclassified

Source: Dienst Onderzoek en Statistiek

52

Hotel guest nights development Amsterdam

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Source: TourMIS

Annual growth: 2,1%

Development 1990-2008: 45%

53

Seasonal variation – hotel guest nights per month 2008

0

200 000

400 000

600 000

800 000

1 000 000


Source: TourMIS

54

The current hotel situation in Amsterdam

• The range of hotels in Amsterdam is too one-sided. There are many hotels with 3-4 stars and two thirds of all hotels are in the city centre.

• With an average room occupancy around 80% the hotel market today is “strained”. Hotels are often full and the city is not always able to accept meetings and events because of the lack of capacity.

• The hotels are usually full during 46 out of 52 weeks in a year. 6 weekdays of 7 has a high occupancy rate and it is only on Sundays that it is possible to increase the number of occupied rooms.

• The city’s goal is to have 9 000 new hotel rooms by the year 2015. To reach this goal a “Hotel Development Intermediary” has been given the task to make it easier for new hotels to establish themselves inAmsterdam.

• The goal for the average occupancy rate is 75 %.

55

Views on the hotel situation in Amsterdam • All the interviewed persons consider the range of hotels to be too one-

sided. There are too many 4 star hotels. • Most of the international hotel chains are represented in Amsterdam. • Amsterdam is now short of hotel rooms and this concerns all price

categories, though budget hotels are prioritized. Many hotels still want to increase their standard to have a higher star rating and there are not many of the bigger hotel chains that have budget hotels.

• There is also a demand for accommodation for those who stay longer on the destination, so called mid and long stay.

56

Hotel room occupancy by star rating 2007

74%80% 82%

72%

0%

20%

40%

60%

80%

100%

0-2 stars 3 stars 4 stars 5 stars

Source: Dienst Onderzoek en Statistiek

57

Effects of budget hotels • Amsterdam’s long term shortage of hotel rooms has affected the tourism

growth in the city which they believe could have been higher if there would have been more hotel establishments.

• There has been no follow-up of the consequences of new budget hotels in Amsterdam. Though, occupancy statistics related to the hotel standard is continuously presented.

• The 3 and 4 star hotels have a higher occupancy rate than other hotels. This indicates a high demand for middle class hotels which explains the current hotel situation in Amsterdam.

• A demand for budget hotels does not have to indicate that tourists spend less money on the destination but that their money is spent on other things, like shopping, entertainment and night life.

58

Target group budget hotels

• Mainly leisure travellers demand budget hotels, though there is no specific profile for hotel guests seeking budget hotels.

• Among leisure travellers it is mainly young people who require budget hotels. But families with kids and group travellers are also among those who prefer to stay at budget hotels.

• In Amsterdam there is a demand for budget hotels among visitors from China and eastern Europe. This is likely due to the existing standard of living in these countries and will also likely change when the standard of living changes for them.

• Among the business travellers mainly guest workers and visitors from developing countries request budget accommodation.

59

Demand for budget hotels in Amsterdam

• Amsterdam is a popular destination among leisure travellers and the city has successfully worked with season extension. New markets and a longer tourist season has contributed to the increased demand for budget hotels.

• Amsterdam attracts many young tourists which generally is a group that demand budget accommodation.

• One contributing factor to the growth in demand for budget hotels is the increase in low cost air traffic in recent years. It has made it possible for new international tourists to visit Amsterdam.

• 60% of leisure travellers live in hotels when visiting Amsterdam (47% in 3-star hotels) and 20% chose to stay in youth hostels or similar forms of accommodation. The rest stay at friends, relatives or at camping grounds.

• According to Amsterdam’s visitor survey, based on 6 000 interviews with tourists, almost all business travellers select hotels with 3 stars or more.

60

Expected effects of more budget hotels • More budget hotels would probably not lead to new tourist groups

discovering Amsterdam. On the other hand, budget hotels are needed in order to increase the tourism growth.

• More budget hotels could increase the number of young tourists, families, and tourists from developing countries.

• More budget hotels means that more visitors would come to Amsterdam which would increase income and revenue for local businesses.

• Developing Amsterdam as a destination means so much more than only increasing the accommodation capacity. The effects of tourism in central Amsterdam are now considerable and it is important to increase tourism in the city’s outer areas.

61

The city’s function in attracting hotels

• The long term goal for the occupancy rate in Amsterdam is 75%, which would require 9 000 new hotel rooms before 2015.

• There are clear guidelines for the process of reaching this goal. The city of Amsterdam has created a new position “Hotel Development Intermediary” who’s mission is to attract more hotel establishments.

• The city shall support and facilitate for interested investors, property developers and property owners. The city will also actively seek out the representatives of the above.

• The city shall also work to find suitable locations for new hotels as well as inform about and market the available locations.

62

The city’s function in attracting hotels, 2

• The city will look at short term solutions for the possibilities of using the water in the city for hotels, in the form of hotel boats etc.

• The city will examine the possibilities to transform vacant office space to hotels.

• The industry welcome the city’s involvement in attracting hotels. Even so, the objectives should be overlooked due to the current recession.

63

Destination Hamburg

Hamburg is the second largest city in Germany. Around 1,7 million people live there and the city is the centre of northern Germany. Hamburg attracts both business and leisure travellers. Hamburg has many attractions, like the harbour area, Reeperbahn, Ballinstadt, Alster, historic buildings, the fish market and museums. There is also a wide supply of events, theatres and musical shows. The fair in Hamburg has almost 100 000 square meter of show room and the congress facilities are able to accept up to 12 500 persons.Hamburg is a major hub, with many direct routes within Europe and worldwide.

64

Hotel capacity in Hamburg• Hamburg has 288 hotels with 38 000 beds.• 55% of the hotels are 3-4 star hotels.

Number of hotels in each category

4%21%

34%14%

3%24%

0% 5% 10% 15% 20% 25% 30% 35% 40%

5 stars

4 stars

3 stars

2 stars

1 star

unclassified

Source: Hamburg Tourismus Gmhb

65

Hotel guest nights development Hamburg

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Source: TourMIS

Annual growth: 3,8%


66


0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000


Source: TourMIS

67

The hotel situation in Hamburg today

• Hamburg’s hotel supply is relatively diversified. Though most hotels areeither 3 or 4 stars. Approximately half of the hotels are located in the city centre and the rest of the hotels are evenly located in the city’s outer areas.

• With an average occupancy rate of 70-75% there is no immediate lack of hotel rooms but considering the fact that the hotels are full at times and that Hamburg is a growing city there is room for more hotels.

• The occupancy rate at the hotels are highest from early summer until autumn. The occupancy rate is at it’s lowest in December due to less leisure tourists and fewer meetings and congresses.

• Additional hotel establishments is important for Hamburg to maintain it’s position as one of northern Europe's most popular destinations. The city has, among things, reserved municipal land for new hotel projects.

68

Views on the hotel situation in Hamburg• The interviewees in this study believe that Hamburg’s hotel supply is

varied. Several major international hotel chains are represented. • There is no shortage of hotel rooms today in Hamburg. With an average

room occupancy rate between 70% and 75% the hotels are sometimesfull and there room for new hotels.

• The hotel market has expanded substantially during the 21st century. Between 2002 and 2008 hotel room capacity has increased by approximately 40%.

• Despite the large expansion in hotel rooms there is still a need for more new hotels due to a continuous economic growth in the region. There is a need for hotels in all price categories, from budget to luxurious hotels.

69

Effects of budget hotels• Many budget hotels have established in Hamburg during the past

decade. According to Hamburg Toruismus GmbH, 11 new budget hotels opened between 2002 and 2008. Two of the major budget hotels (Motel One Hamburg Altona and A&O Hostel Amsinchstrasse) also increased their room capacity.

• All in all 2 000 new rooms in budget hotels were added to the Hamburg hotel capacity from 2002-2008. These rooms represented 41% of all new rooms during the same period which indicate a high demand for budget accommodation in Hamburg.

• The effects of new budget hotels in Hamburg have not been measured due to the fact that the statistics is not presented by hotel classification. Though the German budget hotel chain Motel One who has two facilities in Hamburg reported an average room occupancy rate of 71 %, which indicates a high demand.

70

• There is no specific profile of budget hotel guests. However, it is mainly leisure travellers.

• There is a demand for budget hotels among all tourist groups (business travellers, leisure travellers, groups and MICE visitors) but the demand is thought to be higher among leisure travellers.

• Primarily young people and families are among those leisure travellers that demand budget hotels. In general the demand decreases as the age increases.

Target group budget hotels

71

Demand for budget hotels in Hamburg

• Hamburg is a popular destination with a positive tourism growth. In the past decade the number of guest nights have increased by 65% (source: Statistikamt Nord).

• The leisure travel segment focuses on city break tourists and have successfully worked with theatres and musicals packages.

• An expected growth in overnight visitors to Hamburg will also mean an increased demand for budget hotels.

• Business travellers often prefer hotels with 3 stars or more. Although during a recession the demand for budget accommodation will likely increase even among business travellers.

72

Expected effects of more budget hotels• In Hamburg they do not expect to see any particular effects of budget

hotel establishments. But they do expect more overnight visitors to Hamburg which means that budget hotels is needed to meet the increased demand for accommodation.

• In Hamburg they believe the demand has driven the hotel expansion. They also believe that the demand will increase both among leisure and business travellers.

• More tourists means increased revenue for the local businesses and contributes to a continuing growth.

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• Since 2008 Hamburg’s hotel expansion is a prioritized issue for the municipality and to encourage hotel establishments municipal land has been allocated for future hotel projects.

• The city is also working actively to attract investors interested in building hotels in Hamburg.

• There are no goals set on regarding the future hotel expansion. But they see a future need for more hotels in all hotel segments, from budget to luxurious 5 star hotels and from family hotels to design hotels.

74

Destination Copenhagen

The capital of Denmark has around 520 000 inhabitants. The most famous attraction is the statue of H C Andersen’s “The little Mermaid” – one of the most photographed statues in the world. There is also the amusement park Tivoli with 4 million visits a year. Copenhagen attracts both leisure and business travellers. Summer is high season for leisure travellers, but Copenhagen has in recent years also profiled itself as a Christmas destination. Business travelllers usually visit Copenhagen in the spring or fall when most congresses and meetings take place. The airport in Copenhagen is the largest in the Nordic countries and operated around 21,5 million passengers during 2008.

75

Hotel capacity Copenhagen• Copenhagen has 93 hotels with around 13 400 rooms and 26 000 beds. • Most of the hotels in Copenhagen, 78%, has either 3 or 4 star.

Source: Horesta


5%33%

45%9%

1%6%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

5 stars

4 stars

3 stars

2 stars

1 star

unclassified

76

Hotel guest nights development Copenhagen

Source: Denmark statistics and Horesta

0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Annual growth: 3,0%


77


0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

Jan Feb Mar Apr Maj Jun Jul Aug Sep Okt Nov Dec

Source: Denmark statistics and Horesta

78

The hotel situation in Copenhagen today

• During the last decade the hotel market in Copenhagen have developed strongly. More hotel chains are established in the city and have taken over individual hotels. The number of hotel rooms have increased from around 9 000 to 13 400. Another couple of thousand hotel rooms will be added over the next years when new hotels open.

• Currently it is estimated there is a need for at least 300-400 new hotel rooms per year and the planned hotel projects meet this demand. Many of the new hotels in Copenhagen are located in the new city district Ørestad, between the city centre and the airport. It is also in this area that the biggest congress centre is located.

• A few years ago, almost all hotels in Copenhagen were either 3 or 4 star hotels. The new hotels built today are increasingly either 2 or 5 star hotels.

79

Views on the hotel situation in Copenhagen

• Overall the interviewed persons are satisfied with the range of hotels in Copenhagen today. There is a good mix of everything from budget to luxury hotels and there are hotels both in the city centre as well as in the outskirts around the congress facilities. However, many of the hotels belong to large hotel chains and there are very few niche hotels and design hotels.

• They see the presence of international hotel chains as positive for Copenhagen. It helps when attracting foreign tourists and also to put Copenhagen on the world map. The globalization has increased theinterest in Copenhagen and it is now a more attractive city to invest in.

80

Effects of budget hotels

• So far, not that many budget hotels have opened in Copenhagen. The two largest, Cab Inn in Ørestad and Wakeup Copenhagen in the city centre opens up in 2009 and have over 1 200 rooms together.

• Budget hotels have increased in number without any negative impact on the rest of the hotel market in the city. The number of guests has increased as the room capacity has increased.

• In the short term there is some concern about how the market will be affected by the large increase in capacity during the recession. One concern is if there is sufficient interest among leisure travellers to stay at the hotels in Ørestad to occupy these even during weekends.

81

Demand for budget hotels in Copenhagen

• Budget hotels are expected to attract both leisure and business travellers.

• The potential to attract larger conventions to Copenhagen will be greater when everyone, regardless of budget, can participate. People associated with universities, foreign guest workers such as construction workers are often mentioned as possible target groups for budget hotels.

• Among leisure travellers mainly young visitors and those who nowchoose to stay at youth hostels can see budget hotels as an alternative form of accommodation.

• Because most of the budget hotels are connected to Danish hotel chains they are unknown among international tourists. This also means that most of the guests in these hotels are Danish.

82

Expected effects of more budget hotels

• The expanded number of budget hotels in Copenhagen will likely result in more Danish guest nights due to the fact that it will be cheaper for the Danish visitors to stay at hotels instead of staying at friends or relatives when visiting Copenhagen.

• Another possible effect is that city break travels will increase when those tourists with a more slim budget can afford to stay overnight inCopenhagen. Though Copenhagen is still considered to be an expensive destination therefore these effects might not be so noticeable.

• In general, budget hotels are considered to be a positive complement to the current hotel market in Copenhagen. On the other hand, the 5 star hotels are seen as an important complement as well.

83


• Copenhagen Capacity is the investment agency in Copenhagen. In the past decade they have played an active role in attracting new hotel projects. Their objective has been to attract hotel chains to invest and open hotels in Copenhagen. They have also tried to make people aware of the need for hotels. Before them there was no one who worked on these issues.

• The conditions for potential investors to gain access to land in the city has not been considered difficult. Prices has been set by the market and considered a mirror reflecting the future earnings the hotels will create. The city of Copenhagen has neither been active sellers nor marketers of these properties.

84

The city’s function in attracting hotels, 2

• In the nearest future, Copenhagen Capacity’s role in the area of hotel expansion will subside. It is not seen as a high prioritized area anymore because the planned capacity growth is believed to meet future demand over the next few years. The current global recession is also said to have an effect for the organisation to prioritize areas.

85

Comparison of hotel markets 2008 Amsterdam Hamburg Copenhagen Stockholm

Number of hotels 357 288 93 127

Number of hotel rooms

20 000 15 600 13 400 14 900

Number of hotel beds43 000 38 000 26 000 29 600

Number of guest nights

8 300 000 7 700 000 4 800 000 5 500 000

Average hotel room occupancy rate 76%* 73% 68% 70%

RevPAR 1 000 skr 700 skr 800 skr* 805 skr

Source: Dienst Onderzoek en Statistiek, Statistikamt Nord, Danmarks statistik, Horesta,

SCB

* 2007

Exchange rate: 1 EUR=10 skr, 1 DKK=1,25 skr

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Comparison hotel market• Amsterdam and Hamburg attract considerably more overnight guests

compared to both Copenhagen and Stockholm. • In 2008 the hotels in Amsterdam reported around 50% more guest nights

than hotels in Stockholm. Hamburg reported around 40% more hotelguest nights.

• The hotels in Amsterdam has both a higher occupancy rate and a higher average room rate. It is the high demand for Amsterdam hotels that has helped to raise prices. The high room price in Amsterdam is seen as a weakness and could have a negative impact on leisure travel.

• The hotels in Amsterdam has a higher occupancy rate compared to the other destinations due to the capacity shortage.

87

Hotel guest night development 1990-2008 Index

50

100

150

200

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Amsterdam Hamburg Copenhagen Stockholm

Source: TourMIS

88

Comparison of the guest night development

• All destinations report a positive growth in guest nights since 1990. • In Stockholm the early 1990’s recession was noticeable but after that the number

of hotel guest nights have increased every year except in 2002. • Amsterdam’s hotels have not reported the same growth as the other destinations.

Amsterdam has had a shortage of hotel rooms for a long time and the city has therefore taken action and set clear goals for the future hotel expansion.

• In Hamburg the number of hotel guest nights was relatively unchanged up until 1996 when it increased sharply. During the 21st century the number of guest nights increased a lot and the hotel expansion have been quite strong.

• With the exception of 1997 and 2008 the guest nights in Copenhagen has either remained unchanged or increased compared to the previous year. The growth in guest nights in Copenhagen has not been as strong as in Hamburg and Stockholm and it was mainly in the last few years that the Copenhagen was left behind.

89

Number of hotels in each category

0%

10%

20%

30%

40%

50%

60%

unclassified 1 star 2 stars 3 stars 4 stars 5 stars

Amsterdam Hamburg Copenhagen Stockholm*

* Those Stockholm hotels not classified by SHR have been categorized by TUI.

Source: Dienst Onderzoek en Statistiek, Dehoga, Horesta, SHR, TUI

90


0%

10%

20%

30%

40%

50%

60%

unclassified 1 star 2 stars 3 stars 4 stars 5 stars

Amsterdam Copenhagen Stockholm*

No data for Hamburg

* Those Stockholm hotels not classified by SHR have been categorized by TUI.

Source: Dienst Onderzoek en Statistiek, Horesta, SHR, TUI

91

Comparison of hotel capacity

• None of the destinations have a particularly wide range of hotel rooms in 1 or 2 star facilities.

• Although both Amsterdam and Hamburg are popular destinations among leisure travellers and also have a long tourist season the range of budget accommodation is relatively small.

• In Amsterdam, budget hotels is one of four prioritized forms of accommodation that the city want to attract.

• Many budget hotel chains have opened hotels in Hamburg in the past decade which has contributed to the heavy growth in guest nights during the same period.

• Although the demand for budget hotels is said to be high on all destinations there are many challenges in establishing budget hotels.

92

Seasonal variationguest nights per month 2008

0%

2%

4%

6%

8%

10%

12%

14%


Amsterdam Hamburg Copenhagen Stockholm

Source: Dienst Onderzoek en Statistiek, Statistikamt Nord, Denmark statistics, SCB

93

Comparison of seasonal variation • Amsterdam is the destination with least seasonal variations. The tourist

organisation in Amsterdam has been successful in its work to extend the season for both leisure and business tourism.

• In Hamburg the low season is primarily during December and January. Though they do plan to profile Hamburg as a Christmas destination which will likely lead to a higher occupancy rate at the hotels in December while January and February are distinguished by few leisure travellers and few meetings and congresses.

• Both Copenhagen and Stockholm has a peak during the summer. In both cities the season for leisure tourism is shorter than in Hamburg and Amsterdam.

94

Effects of budget hotels

• All three destinations (Amsterdam, Hamburg and Copenhagen) have identified a demand for budget accommodation.

• In Amsterdam, budget hotels is one of four prioritized accommodation forms in their hotel policy that describe how to attract more hotels. More budget hotels in Amsterdam will lead to more tourists visiting the destination, where there is currently a shortage of accommodation.

• In Hamburg many new budget hotels have opened in the last decade, mainly by German hotel chains such as A&O Hostels and Motel One. Both chains specialize in central and modern accommodation. Also budget hotel chains within the Accor group have opened hotels in Hamburg (Etap and Ibis). In Hamburg they see a continuing need for more hotels, including budget hotels, due to an expected growth in tourism.

• Budget hotels are quite new to Copenhagen and there more budget hotels about to open. They believe that these hotels will attract mainly Danish tourists, city break tourists and also give them new possibilities to attract more congresses and meetings.

95

Challenges when establishing budget hotels

• A major challenge is said to be the costs. To build a hew hotel costs about the same regardless of the hotel standard. The land prices are also the same regardless of what type of hotel you build.

• In the hotel world there is always a striving for better standards. Therefore hotels usually try to get another star to their rating because that means that they can charge more.

• The number of stars is associated with the hotel’s image and it is considered more prestigious the more stars you have.

96

Conclusions• On all destinations there is a demand for budget hotels. • Leisure travellers are the major target group, particularly young persons and

families with children. • Among business travellers there is a demand among guest workers and visitors

from developing countries. • Budget hotels have opened in both Hamburg and Copenhagen. Only a few

budget hotels have opened in Amsterdam but the city prioritize more budget hotels.

• On all destinations they regard the hotel expansion to be important and they support the expansion by allocating municipal land among other things.

• There is no statistics showing the effects of budget hotel establishments but in general all destination agree that it leads to more tourists.

• Budget hotels do not contribute to new tourist groups coming to the destination. But it attracts more tourists within the target groups that demand budget accommodation.

• Visitors staying at budget hotels do not consume less money than other tourists. They simply choose to reallocate their consumption and spend more money on things like shopping and entertainment instead of accommodation.

Part 5 The need for hotels in StockholmInterview study regarding the need of hotels in Stockholm, with focus on variety

98

Purpose of the study

By studying existing views about the current hotel demand in Stockholm we can determine if there is a shortage of any form of hotel accommodation. This study is based on interviews with hotel experts and representatives from Stockholm’s hotel and tourism industry and their answers have been analysed together with available statistical data to illustrate the future demand for hotels in Stockholm and in which hotel segments there might be a lack of capacity today.

99

Survey structure

This study is based on interviews with hotel expert and representatives from the tourism and hotel industry in Stockholm. The interviewees were selected by TUI in consultation with SBRD and represent both leisure and business travel as well as the hotel industry. They were chosen due to their knowledge and experience from the hotel market in Stockholm and represent; the demand (business and leisure travellers), the supply (hotel operators and hotel owners) and also neutral experts.

The interviews were conducted by telephone and booked in advance so that each person could put the requisite time in their schedule for the half hour interview. The interviewees were not compensated in any way for participating and the answers are anonymous.

100

The interviewedName Organization

Peter Terpstra Swedish Agency for Economic and Regional Growth (Tillväxtverket)

Björn Arnek Swedish Hotel and Restaurant Association (SHR)

Peter Lindqvist Stockholm Visitors Board

Bo Magnusson MCI

Anders Nissen Pandox

Monika Malmén City Conference Centre

Stefan Lundin Accor

Finn Andresen Connect hotels

Marie Lindqvist Globe Arenas

P-O Magnusson Hotel consultant

101

Views on Stockholm’s hotel market• Representatives of the tourism and hospitality industry in Stockholm

think that there are enough hotel rooms in Stockholm but that the range is one-sided. The 4 star hotels dominate the market and the business travel segment has driven the development, especially in the city centre.

• The representatives of leisure tourism consider that there is a shortage of budget accommodation in the city centre. There is also a lack of other budget accommodation types like youth hostels.

• Those representing business tourism consider the range of business hotels to be good but the price level has been relatively high in recent years. Hotel prices have risen on average by 42% over the past decade, compared to CPI that increased by 17% over the same period. However the current recession has led to price reductions which benefit the tourists.

102

Views on Stockholm’s hotel market, 2• The business travel segment demands a hotel of international 5 star

standards, primarily for international business travellers. There is also a lack of centrally located budget alternatives for MICE visitors.

• Representatives of both leisure and business tourism believe that the hotel chains dominate. Scandic Hotels alone accounts for 17% of Stockholm’s hotel rooms.

103

Hotel demand in Stockholm• All the interviewees agreed that because of the current financial situation

there is an oversupply of hotel rooms in Stockholm today. • Although, in the long term and for specific tourist groups there is a

demand that can not be met with today’s hotel supply. • Regarding the leisure market, the growth in low-cost airline traffic has

created an opportunity for new markets to explore Stockholm. But the tourists travelling with low-cost carriers are not interested in spending too much money on accommodation. They would rather spend money on shopping and entertainment instead. Within this tourist group there is a demand for more affordable and centrally located accommodation.

• For the MICE segment, there are academic meetings with delegates who require centrally located accommodation alternatives. Also MICE visitors from developing countries request budget alternatives.

104

Hotel demand in Stockholm, 2

• Both individual business travellers and MICE visitors request internationally known hotel chains. For these tourists, the brand is more important than standard and price. Some nationalities has a policy only to stay in hotels belonging to selected chains.

• In the short term, the demand for 5 star hotels has declined due to the recession.

• The interviewees disagreed regarding boutique and design hotels. Some believe that the current supply together with future hotels will lead to too many rooms and others think that there is room for more hotels within the genre thinking that it could attract new tourist groups to Stockholm.

105

Need for hotels according to interviewees

Type of hotel

Number of interviewed persons that

think there is a need in Stockholm

Budget hotels/2 star hotels/economy hotels

7

5 star hotels by international standard 3

Design- and boutique hotels 2

Headquarter hotel with adjoined meeting facilities

1

106

Demand for other types of accommodation in Stockholm

• Youth hostels are considered to attract mainly leisure travellers. According to those interviewed by TUI there is a demand for centrally located youth hostels for those who can not afford to stay at hotels. Though youth hostels located in central Stockholm today are approaching hotel prices.

• Staying at camping grounds is also a type of accommodation that primarily attract leisure travellers. Those interviewed in this study believe that there is no demand for this type of accommodation all year round, but during the summer months.

• Business travellers who stay longer periods in Stockholm requestapartment hotels. This also applies to researchers and students who attend meetings in Stockholm. They want cheaper accommodation, but at the same time centrally located.

107

Stockholm’s future hotel market

• Given the current recession and with regards to all planned hotel projects the general opinion is that there may be an oversupply in the short term. However most of them believe in a positive economic growth over the next two years.

• In the long run the future looks rather positive. Investments in new arenas, for example the new National Arena, and in the Globe area and Stockholm Waterfront will contribute to Stockholm’s economic growth.

• The hotel market in Stockholm is depending on business travellers and the economic cycle. The long term trend is that the hotel market will grow. Between 1980 and 2008 the number of hotel guest nights increased by 166%, which is equivalent to an annual growth rate of 3,6%.

• Opinions on the future growth varies between 2%-4% annually from 2011 onwards.

108

Views on the city of Stockholm’s role in attracting hotel investments

• Some of the persons interviewed are in favour of the City of Stockholm being active in attracting investors. Others believe that the city’s representatives should focus more on creating the right conditions for hotel establishments by leasing or selling municipal land, improve infrastructure and communications and by working to attract major events and congresses to the city.

• A strategy for Stockholm’s future hotel market is requested, not just concerning geographic location of the hotels but also the mix of hotels. One of the interviewed persons mentioned that, for example, if you continue to sell land to the highest bidder in the future there will only be luxury hotels in the central parts of Stockholm.

109

Target groups for budget hotels

• The interviewed persons agree that mainly leisure travellers request budget hotels. Younger tourists are more common among them and also families with children would be a potential target group for hotels with family rooms.

• The reason that more tourists choose budget accommodation is said to be that they want to be able to spend more of their travel budget on entertainment and shopping etc.

• Within the business travel segment it is mainly visitors from developing countries with lower income levels that demand budget hotels. Also students and researchers visiting Stockholm demand inexpensive accommodation.

Summarizing discussionSummarizing analysis and discussion of all five parts of this report

111

Stockholm’s hotel supply

• All parts of this report point to the fact that the range of hotels in Stockholm is relatively one-sided. There are mainly 3 and 4 star hotels. In general the hotel standard in Stockholm is considered to be high which is also reflected in the price level.

• Looking at the price level the range is also too one-sided and the hotels do not differ that much by price. The youth hostels approach hotel price levels as their standard increases.

• The hotel market in Stockholm is dominated by Scandinavian hotelchains as Scandic, Choice and First Hotels.

112

Stockholm’s future hotel demand • Stockholm hotels have historically performed better than hotels in the rest of the

country. Between 1980 and 2008 the number of sold rooms in Stockholm increased by an annual growth rate of 3,3%. The number of hotel guest nights increased during the same period with a slightly stronger annual growth rate of 3,6%. This indicates that leisure travellers gain in numbers as business tourists more often are alone when travelling.

• Over the next few years considerable investments will take place in tourism facilities and arenas, such as Stockholm Waterfront and the National Arena.

• There is uncertainties about the impact of the current recession on future travel. The concerns regard business travels and the restrictions due to economic and environmental reasons but also due to new technology that leads to new meeting opportunities.

• Stockholm is a growing region and with expected growth in both the number of companies and inhabitants.

• From 2010, GDP is expected to grow and from 2013 unemployment will likely decline.

A hotel room is defined as sold when at least one person stays in the room. A guestnight

consists of one person’s overnight. Two persons staying in a double is reported as one room

sold but two guest nights.

113

Prognosis hotel demand• TUI believes that the hotel demand in Stockholm will increase. In total, TUI

predicts an increase of approximately 23% during 2010-2015.• After a decrease in the number of rooms sold in 2009 the demand is expected to

grow slowly in the beginning of the forecast period partly due to investments in facilities like Stockholmsmässan and Stockholm Waterfront, and partly because of a continuing growth in leisure travel.

• From 2013 the employment rate is expected to increase and GDP will continue to grow. Thereby TUI predicts a continuously strong growth in demand. However TUI has taken some precautions as there are some uncertainties regarding the recession’s long term impacts on future travel.

2010 2011 2012 2013 2014 2015

Prognosis number of sold hotel rooms (thousands)

3 725 3 840 4 010 4 230 4 400 4 575

114

Prognosis commercial accommodation demand• TUI believes that the demand for commercial accommodation facilities (hotels, youth hostels

and camping grounds) will increase by approximately 24% in Stockholm from 2010 to 2015. • At the beginning of the forecast period, the demand for youth hostels and camping grounds will

increase more rapidly than the demand for hotels. • At the beginning of the forecast period, the demand is expected to increase moderately due to

new facilities and a strong growth in leisure travel. • From 2013 the employment rate is expected to increase and GDP growth is expected to remain

strong. TUI thereby predicts a continuous strong increase in demand. However, some caution has been taken, due to the uncertainties of the recession’s long term impacts on future travel.

2010 2011 2012 2013 2014 2015

Prognosis total number of guest nights (thousands)

6 510 6 780 7 090 7 440 7 740 8 050

115

Stockholm’s hotel need• In July 2009 there were approximately 15 700 available hotel rooms according to SCB. That

would mean an annual capacity of around 5,6 million rooms. • Besides the current capacity, additional new hotels will open during the forecast period which

causes an increase in the capacity. In the table below, the capacity is compared to expected future demand.

• No consideration has been taken to the type of accommodation and standard requested.

2010 2011 2012 2013 2014 2015

Expected capacity (thousands)*

5 900 6 100 6 250 6 350 6 450 6 600

Prognosis sold hotel rooms (thousands)

3 725 3 836 4 010 4 230 4 400 4 575

Occupancy rate hotel rooms

63% 63% 64% 67% 68% 69%

* Planned hotel projects have been considered. The uncertain hotel project are assumed to

open from 2012 and until 2015.

116

Stockholm’s need for commercial accommodation• In July 2009 there were approximately 34 500 available beds in hotels and youth hostels

according to SCB. That corresponds to an annual capacity of around 12 million beds. Added to that, there are camping grounds with a capacity of at least 200 000 guest nights annually.

• Besides the current capacity new hotels will open during the forecast period increasing the capacity. The capacity is compared to expected demand in the table below.

• No consideration has been taken to the type of accommodation and standard requested.

2010 2011 2012 2013 2014 2015

Expected capacity (thousands)*

12 600 12 800 13 000 13 200 13 400 13 600

Prognosis demand (thousands)

6 510 6 780 7 090 7 440 7 740 8 050

Occupancy rate beds 52% 53% 54% 56% 58% 59%

* Planned hotel projects have been considered. The uncertain hotel project are assumed to

open from 2012 and until 2015.

117

Stockholm’s future need for accommodation facilities• At the beginning of the forecast period there is no shortage of capacity. An average

room occupancy rate of around 65% is considered to be relatively satisfactory and can be compared to the occupancy rate in recent years which has been close to 70%.

• Over the next two years, the number of hotel rooms is expected to increase by 8%. The demand will not increase as much, which leads to a declining room occupancy in the beginning of the forecast period.

• Towards the end of the forecast period, mainly during the last two years, room occupancy is expected to increase close to 70% indicating periodical lack of capacity.

• The demand for all types of accommodation will increase throughout the forecast period. Initially the occupancy rate of available hotel and youth hostel beds will be approximately 50%. Over the last two years of the forecast period demand is expected to lead to a bed occupancy close to 60% which means a capacity shortage in certain periods.

• In order for the tourism and hospitality industry to continue growing in Stockholm there is a need for a capacity increase in the second half of the 2010s.

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Conditions for budget hotels

There are some conditions that should be met in order for a budget hotel to be profitable. • low construction costs• low operating costs• large volume (many rooms)• high occupancy

This can be compared to facilities like Gekås, a budget department store in Ullared, or Överskottsbolaget.

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Demand for budget hotels in Stockholm

There is already a demand for budget hotels in Stockholm. The demand is mainly driven by leisure travellers, both domestic and international. Although, in the MICE segment an increased demand for budget hotels has been identified especially among academic meetings and meetings attracting visitors from developing countries.

As for the leisure travel market, the tourist season is relatively short in Stockholm compared to destinations such as Amsterdam and Hamburg. This results in a high demand for a limited period.

To maintain a high demand all year round, it is important to aim for a longer tourist season for leisure travellers.

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Challenges for budget hotels in StockholmStockholm, like most big cities, is characterized by it’s high land prices. This is mentioned to be one of the biggest obstacles for budget hotelestablishments. This was also mentioned as a major obstacle by the interviewees in the other three cities studied in this report. Due to the high land prices investors would rather build hotels with higher standard to be able to charge more per room.

Another minor problem mentioned by many, is that in the hotel industry it is considered more prestigious to work in and run a hotel with many stars. Unfortunately there is generally no pride in running a budget hotel.

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Summarizing conclusions TUI believes that the demand for hotels in Stockholm will increase by approximately 23% during 2010-2015. In terms of the current capacity and all future planned hotel projects there is no shortage of capacity at the beginning of the forecast period. The average expected room occupancy rate is satisfying and it is not until the end of the forecast period that there might be a lack in capacity.

In order to prevent the anticipated lack of hotel rooms by the end of the forecast period it is important that plans for further hotel expansion begin in 2010.

Stockholm’s range of hotels is considered to be one-sided and dominated by the large hotel chains. Most hotels are either 3 or 4 star, though there is a demand for budget hotels mainly among leisure travellers. Because of the short season for leisure travellers it is difficult to create profitability and a high occupancy year-round when running a budget hotel. The main challenge is therefore to extend the tourist season for leisure travellers.

Amsterdam, Hamburg and Copenhagen have identified a huge demand for budget accommodation. With the establishment of budget hotels all destinations believe it will contribute to a growth in tourism.

hotel report stockholm

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