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Less Trade Fairs to Aggravate German Hotel Downturn

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The German chain hotel market ended the year with a 1.8% increase in Revenue per Available Room (RevPAR), making it one of the best-performing European countries in 2008.

According to MKG Hospitality’s market monitoring database, Hotel CompSet, Average Daily Rate (ADR) rose by 3.9% compared to 2007, whilst Occupancy Rate (OR) saw a slight reduction of 1.3 percentage points.

Budget and Midscale chain hotels achieved the best results in 2008, both with a 3.1% increase in RevPAR, fuelled by a 6.2% and 5.5% increase in ADR, respectively.

The Upscale segment only managed a 0.9% increase in RevPAR, whilst OR weakened in all categories.

“We can expect this trend to continue during 2009’s economic downturn, as people cut back on expenses and travel less,” said Director of Development, MKG Hospitality, Vanguelis Panayotis. “Germany particularly relies on the MICE sector, which is also forecasted to suffer this year. The economic crisis will continue to force many businesses to cut back on business travel as much as possible, as well as spend a lot less on marketing and promotions. Furthermore, there are fewer trade fairs planned in 2009.”

Germany’s overall positive performance in 2008 was fuelled by high RevPAR increases in Essen (18.7%) and Dusseldorf (16.3%) for example. According to Panayotis, these destinations hosted a great deal of trade fairs, consequently boosting their demand and allowing hoteliers to raise average selling prices.

Senior Vice President Europe, Mövenpick Hotels & Resorts, Ola Ivarsson, said, “There is no doubt that the market will contract and we will see some capacity increases continue from projects already started. However, we also see that many customers are now moving away from the 5-star luxury brands to the upscale segment, where Mövenpick is well positioned.”

Switzerland achieved an 8.5% increase in RevPAR for 2008, driven by a 9.7% rise in ADR. The Midscale segment was especially buoyant with RevPAR soaring 12.6%. Although promising results, these figures mainly represent key cities in Switzerland – heavily revolving around business travel, summits and conferences.

Like in Germany, Switzerland’s MICE segment is also expected to somewhat shrink in 2009, as Associate Director, Turicum Hotel Management, Konrad de Vries explained, “Switzerland, as compared to Germany entered the meltdown cycle about two or three months later and as such RevPAR growth reflects the good performance of the first 10 Months of 2008.”

“We experienced a down-trading in the MICE Market (from luxury/first class to mid-market hotels), and the AIG Syndrome with regards to Corporate expenditure. As a result, the branded mid-market hotel sector will benefit and do well in 2009, whilst the upscale sector, with or without discounting, will be back to 2001’s RevPAR’s.”

Although Vienna on its own stayed clear from the negative zone, Austria’s global RevPAR decreased by 1%, mainly due to a four percentage point reduction in OR and only a modest increase in ADR (4.6%).

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