Hotel industry has to brace itself for a rough year

The hotel industry will ‘bump along the bottom’ until cash becomes more easily available from banks, Charles Romney, partner at CMS Cameron McKenna predicts.

Speaking on a panel at Cushman & Wakefield’s new year summit this week, the industry was told to brace itself for a rough year ahead until bank liquidity returned.

Jamie Chappell, managing director at STR Global, agreed the outlook for 2009 was “not particularly good” but said the downturn had at least come at the right time, at the bottom of the cycle, when trends had been slowing anyway and had followed at least three years of consolidated growth.

He added: “Heavily branded hotels are holding their rates much better than non-branded, which is why Italy, with only 6% branded properties, is having such a tough time. When the market turns it will be the mature brand heavy markets which will hold their rate and increase occupancy levels the quickest.”

He also warned that dropping rates to stimulate demand was “ a myth” and that managers should focus on back of house and cutting costs where possible rather than slashing prices.

Seminar figures revealed:

• Investment in the London hotel market was down to £500m in 2008 from a high in 2005 of £1.5b
• Revenue per available room (revpar) in Europe was down 4.2% in 2008 compared with 5.9% growth in 2007
• Europe’s best performing markets for revpar were Belgium and Germany (up 4.6% and 4.1% respectively), while Italy and Spain saw the largest falls (down 9.9% and 5.4% respectively).

• The Middle East and Africa saw growth of 19.5% overall in 2008 but had a very bad December – with average occupancy down by around 16% and rate down by 28%. Whether this was a blip or the start of a decline in the region remains to be seen.

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By Emily Manson

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