12 euro-zone countries improve average room rates during 2002

Year-end 2002 hotel performance data from the HotelBenchmark Survey by Deloitte & Touche reveals that despite the tough trading conditions during 2002 average room rates for hotels within the euro-zone exceeded 2001 levels. Across the 12 euro-zone countries, average room rates rose by 0.5% to reach €106 for the year. The increase in room rates comes despite falls in hotel occupancy. The World Tourism Organisation estimated that international visitor arrivals to Europe increased 2.4% during 2002 to reach 411 million, however this did not translate into incremental demand for  hotels in the euro-zone, where occupancy levels fell by 3.3% to 63% for the year. Consequently revPAR (revenue per available room) fell by 2.9% to €67.

Commenting on the results, Julia Felton, director in travel, tourism and leisure for Deloitte & Touche said: "The improvement in average room rate is  an impressive achievement particularly given long-haul visitors such as the Americans and the Japanese, who are traditionally high spending customers, have curtailed their travel to Europe in light of their own economic conditions and the terrorist threat. It is estimated that the number  of American and Japanese tourists to Europe fell 18% and 20% respectively during 2002, contributing to an overall decline in international tourism receipts of 2.5% across Europe. This put pressure on hoteliers to discount  prices, however within the euro-zone the industry remained steadfast and failed to be drawn into a price discounting war."

Like 2001, many of the southern European cities - Athens, Barcelona, Lisbon, Madrid, Milan and Rome - reported growth in average room rates which in many cases translated into positive revPAR growth. Athens was  the best performing southern euro-zone city with revPAR up an impressive 5%, fuelled by a 2% increase in occupancy combined with a 3% growth in average room rate. Paris was the best performing northern euro-zone city  reporting a revPAR increase of 1.1%. Within this market hotels with an average room rate over €200 were the clear winners managing to combine a 6.2% increase in average room rates with 1.9% improvement in occupancy,  resulting in revPAR growth of 8.2%.

Outside the euro-zone performance was very mixed, with a number of cities - Eilat, Istanbul, Jerusalem, Tel Aviv, Warsaw and Zurich experiencing double-digit revPAR declines. In all cities except Zurich a double-digit fall in  average room rates (in euros) was the contributing factor. In Zurich, the demise of Swiss Air resulted in a significant decline in airport arrivals, which was reflected in a 13.4% fall in occupancy.

London revPAR declined by 6%, more than double the euro-zone average, although the city bucked the trend across Europe by reporting increased demand over 2001, with occupancy levels up 2.5% to 75.3% for the year. The  growth in occupancy however came at a price as London hotels experienced an 8.4% erosion in average room rates to €158. At this level though average room rates are still some of the highest across Europe. In US dollar terms, average room rates in London only fell 1.7% due to the  strength of sterling against the US dollar. In the euro-zone as a whole, the appreciation of the euro against the dollar caused average room rates to move ahead by 7.6%, thus making Europe a much more expensive  destination for the American traveller. This, at a time when the fear of travel is already making travellers from this important source market consider vacation options closer to home, undoubtedly contributed to the reduction  in US travellers.

Marvin Rust, partner in travel, tourism and leisure at Deloitte & Touche noted: "The performance of the London market is currently at odds with that of many other major European capital cities which generally have been able  to increase average room rates during 2002. London hoteliers have adopted a different strategy of stimulating demand by price discounting compared with the continent where hoteliers have sacrificed occupancy but remained firm on rate. Despite this we believe that the fundamentals of the London hotel market are sound and that this market should be able to increase rates  more quickly than other markets when higher rated business returns, which undoubtedly it will."