European hotel industry performance in 2017 will remain steady if unspectacular according to speakers at Whitebridge’s annual New Year Hotel Investment Summit, although that could change if any unpredictable, 2016-esque events occur.
LONDON—“Interesting” was how Nick Pattie, managing director of hospitality industry advisory Whitebridge, summed up the 12 months of 2016.
Whitebridge Director Philip Camble went one step further, speaking at the company’s 12th annual New Year Hotel Investment Summit, saying that 2016 was “one of the craziest years in history.”
“And 2017 will be chock-a-block full of events waiting to happen,” he added.
Pattie said of both years that “actual results are likely to be different from forecasted results.”
The terrorism incidents that befell France, Belgium and Turkey, Pattie said, stood large “against the grain of actual improved performance in Europe.”
“In the United Kingdom, demand dropped somewhat due to the weakness of the pound (sterling) … investment paused after Brexit, then there was a shrug of the shoulders,” Pattie said. He added the world will remain cautious of the political arena throughout 2017.
Forecasting is an unpredictable business, but among Camble’s educated hunches for 2017 are the following:
- London revenue per available room will grow or decline by no more than 1%, with any minuses resulting mostly from continued corporate uncertainty and any pluses mostly from further declines in the value of the pound sterling;
- the Eurozone will see more uncertainty, with perhaps Italy being the most volatile market in that region;
- revenue per available room in France will grow by a minimum of 5%;
- the present government in the United Kingdom will host an election by the end of the year or announce that one will be held in early 2018, and might also do a U-turn on Brexit;
- confused messaging in hotel companies with numerous brands might lead to some rationalization; and
- capitalization rates might slightly increase by this time next year.
Two slightly left-field predictions from Camble were that hotel rooms will offer by the end of the year at least one virtual reality tool, and 3D-printed food also will be served soon.
That might be showcased at next year’s Consumer Electronics Show in Las Vegas, or “it might come to a (Marriott-Starwood) hotel very near to you,” Camble said.
What we do know
Thomas Emanuel, director of business development at STR, Hotel News Now’s parent company, was on hand to sum up 2016 “craziness” in data, the latest figures being year-to-date November 2016.
“In Paris, only 43 nights saw day-to-day occupancy growth in 2016,” Emanuel said.
Performance across Europe, he said, mirrored what he called the Farage Effect, after U.K. politician Nigel Farage, one of the most vocal proponents behind the Leave campaign for the U.K. to exit the European Union.
“The further away from Brussels (markets) are, the better were their performances,” Emanuel said.
European markets that did well in 2016, he added, included Dublin, which recorded a 17% increase in RevPAR in November 2016, and Warsaw, with 10% RevPAR growth.
“Poland had a tremendous 2016,” Emanuel said.
The U.K. industry fundamentals are strong, however, with a number of secondary and tertiary markets in the U.K. showing occupancy levels that are not matched across the rest of Europe, Emanuel said.
Supply in London will continue to be a challenge, with more than 15,000 keys in the pipeline.
“Only Russia, Germany and the U.K. have bigger pipelines than London,” Emanuel said.
Emanuel also gave predictions, led by the notion that demand will drop down to somewhat parallel supply, which is expected to increase across most markets.
There will still be performance growth in 2017, he said, but it will be diminished.
Europe’s star markets in 2016 can hardly be expected to sustain that growth in 2017, Emanuel said.
The U.K. will continue to do well, though, he said.
Secondary and tertiary markets in the U.K. show occupancy numbers that European countries as whole entities cannot boost, Emanuel said.
That occupancy, it is hoped, will absorb increased supply, he added.
Across Europe, the pipeline constitutes only 3% of all rooms, while in the Middle East that figure is 52%.
Following Brexit, STR downgraded performance in London but predicted slight improvement in regional U.K.