Bright spots, looming shadows for Europe hotels in 2019
 
Bright spots, looming shadows for Europe hotels in 2019
14 JANUARY 2019 9:23 AM

Europe and the U.K. will see hotel performance growth in 2019, although that growth will be mixed across the continent as issues such as supply and Brexit come to the surface and after a host of destinations enjoyed stellar growth in 2018.

LONDON—Industry experts predict European hotel performance in 2019 will not light the skies a hundred colors but will continue to rise soberly, notably on the continent.

Speaking at the 14th New Year Hotel Investment Summit conducted by Whitebridge Hospitality and STR, the parent company of Hotel News Now, STR research and analysis manager Natalie Weisz said preliminary data shows mainland European hotels will continue to see performance increases in 2019, although the performance for United Kingdom hotels should be mixed.

Weisz said 2019 revenue per available room in Europe is predicted to be between flat and 3% growth, which constitutes a “slightly slower year” for the continent. Brussels and Paris would see their recoveries of 2018 slow down, while Moscow—on the back of a very successful 2018 (RevPAR +45% for the full year) hosting soccer’s World Cup—would see RevPAR fall by some 20%.

For the U.K., Weisz said both London and markets in the regional U.K. would see occupancy declines in 2019, although all bets were off if the nation divorces the European Union on 29 March with no Brexit deal agreed upon between the two sides.

Nick Pattie, managing director at Whitebridge, provided the most lighthearted statistics of the evening, stating that any downturn in the U.K. would not come from Brexit but the hours of wasted productivity resulting from people having discussed little else.

“The average person has spent 122 hours discussing Brexit since the (June 2016) referendum. … Economic shortfalls will come from talking about Brexit, not Brexit itself,” Pattie said.

Supply in the U.K. might also be an issue, Weisz said. Markets with double-digit percentage supply growth include London Heathrow Airport (+13%), Plymouth (+12%) and Edinburgh (+10%).

Dublin up
In Ireland, Dublin is expected to see 12% supply growth in 2019. But Dublin remains a success story, Weisz said.

In four of the last seven years, the Irish capital’s RevPAR growth in local currency terms has been in double digits. In 2018, Dublin’s RevPAR increased 8%. For 142 nights—almost 40% of the year—Dublin hoteliers saw occupancy at or above 90%, Weisz said.

“Compare that with London, where the number of compression nights came in at just over 30% of the year, and Amsterdam, where it was around 20%,” Weisz said.

That constant success and the addition of supply would see RevPAR decline by 3% in 2019, Weisz added.

Transactions in 2018 and other predictions
Philip Camble, director at Whitebridge, underlined the robust year for Europe hotel transactions and volumes.

London dropped to third in terms of the European transactions value table for 2018, while Spain remained in second place. London was buoyed by the recent buy of London-listed Belmond to LVMH Moët Hennessy Louis Vuitton, while Spanish numbers benefited from Thailand-based Minor International’s buy of NH Hotels.

France jumped to the top spot, fueled by the €4.4-billion ($5 billion) sale of assets from AccorHotels’ AccorInvest platform, Camble said.

“Asian investors came to the fore and recorded their biggest year to date,” Camble said.

Overall, he added, “Western Europe was the big winner.”

In terms of types of investor, sovereign wealth funds saw a noticeable increase in activity, while property companies saw a decline as lease agreements came less to the fore.

Camble said Whitebridge predicts for 2019 that London would see a 2% drop in RevPAR and that beleaguered U.K. Prime Minister Theresa May would continue to kick the Brexit can along the road.

Other predictions from Camble included an increase in hotel supply in Portugal of more than 6.5%, the Italian stock exchange would perform the worst of any European bourse and a major Spanish hotel chain would either acquire or be acquired.

Elsewhere, Weisz said the Middle East region should continue to see declines, notably due to supply, which is causing concern. In Dubai, there are expected to be 160,000 hotel rooms by 2022, up from today’s 110,000, she added.

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