Europe’s hot markets and the threat from overtourism
 
Europe’s hot markets and the threat from overtourism
14 JANUARY 2020 9:28 AM

Hoteliers and analysts share their predictions for the hottest hotel markets in Europe in the next five years, as well as the markets that could face development challenges.

REPORT FROM EUROPE—Several hotel markets in Europe are poised for hotel development in the next five years. In other markets, concerns about overtourism worry residents and politicians, threatening to derail what made those destinations attractive.

Hot market: Paris
Hotels in the French capital and its Ile-de-France region, responsible for approximately 30.5% of national gross domestic product, will continue their rise, according to Philippe Doizelet, managing partner of Horwath HTL France.

“Thanks to major long-term developments Paris has embarked upon, its spillover effect is expected to continue within the next years,” he said.

Three projects stand out:

  • The Grand Paris Express project is the largest urban renewal project in Europe today and aims to improve accessibility, modernize and expand the public transport network, especially in suburban areas.
  • Any infrastructure, accommodation, transport, business and leisure initiatives directly and indirectly concerned with the 2024 Olympic Games will have an impact, since the Olympics are part of government plans to welcome more than 100 million inbound travelers per year from 2020.
  • The creation of the 18.3-million-square-feet Université Paris-Saclay campus collects higher education and research buildings, office spaces, research and development centers, incubators and a business park.

Doizelet said with approximately 300,000 new inhabitants expected in the region by 2025, new hotel supply is not considered a threat and is expected to be absorbed.

“The upscale and upper-upscale supply within Paris’ inner city continues with its growth. … The capital currently enjoys a positive dynamic,” he said. “Some brands—Best Western, MGallery, Novotel and Okko—will strengthen their presence, but Paris also will welcome new operators (such as) Bulgari, CR7 and Cheval Blanc, witnessing the appetite of international brands for the French capital.”

Recently opened hotels such as the 25Hours Hotel Paris Terminal Nord have seen Paris continue its rebound from several episodes of turmoil. (Photo: Terence Baker)

“On a medium term, Paris keeps investing to improve visitors’ experiences,” Doizelet said. “Among the many projects, Paris will build a pedestrian area around the Eiffel Tower and Trocadero by 2024 to 2030 to create a visitor pathway … develop the riverbank in order to make the River Seine a strong touristic axis. … Paris is betting on the possibility to swim in the Seine by the Olympic Games.”

Hot market: Second-tier cities in Spain
Traveler appeal of spending holidays in Spain is expected to “continue to spark the interest of investors” in the coming five years, said Albert Grau, partner and co-director at business consultancy Cushman & Wakefield Hospitality Spain, citing feedback offered from more than 100 hotel industry sources in the country.

“The Spanish hotel industry remains scattered in nature, with a majority of small, family-owned chains. Over the coming years, we will see merger-and-acquisition deals,” Grau said.

Expect Spain’s submarkets to see a lot of investment activity in the coming years, he said.

“Aside from the holiday segment … medium-sized cities will also play a leading role in hotel investment,” Grau said. “The reasons for this are two-fold: firstly, because the asset price is more attractive in terms of achieving a return on investment and, secondly, because tourists are discovering cities that were until now somewhat in the shade of Madrid and Barcelona—Seville, Malaga, Bilbao, Valencia, Santiago de Compostela and Valladolid.”

Valencia, one of the sunniest spots in Europe, is expected to be one of the next Spanish markets targeted by hotel firms. (Photo: Terence Baker)

Hotel demand is growing thanks to a rise in domestic travel.

“Spain has flourished over the last five years with constant increases in the numbers of international visitors and a growth in domestic tourism,” Grau said. “An excellent tourism and service offering, as well as good promotional strategy, have also played their part.”

Economic slowdowns in key demand generator markets such as France, Germany and the United Kingdom might make things unstable, Grau said, but he believes the Spanish hotel industry will “face up to these risks with some degree of certainty and even end up improving its competitive capacity.”

Hot markets: The four B’s
Four Eastern European markets—Baku, Belgrade, Bucharest and Budapest—are poised for development gains, according to Marius Gomola, managing director of the Budapest office of Horwath HTL.

Baku
“Baku will emerge as the gateway to the Caucasus,” Gomola said. “Its already-built airport, hotel, cultural, conference and sports venue boast an infrastructure of world-class quality, and with the anticipated easing of protection of the national (airline) carrier, accessibility will further improve.”

He added city leaders are looking to diversify its economy to be more service-driven, and its tourism will be fueled by Russia, Iran, the Gulf region and China.

Events in 2020 such as the Gymnastics World Championships and some of the games of the UEFA Euro (soccer) championships will see Baku be at the front of many hoteliers’ minds. (Photo: Azerbaijan Tourism Board)

“The Silk Road experience is going to gain larger-scale momentum connecting Azerbaijan with the already flourishing Georgian capital, Tbilisi, which, in fact, has more arrivals then does Baku,” he said.

“The Caucasus’ diversity, vibrant mix of nationalities, cultures, religion, languages and history offer a world of experiences long gone, opening up host of investment in the hotel sector for regional and international investors,” Gomola added.

Belgrade
Serbia’s capital will be on travelers’ wish lists in the next five years, Gomola said.

“Belgrade’s meteoric rise is not a question of if, but when,” he said. “The low-cost carriers will drive its discovery to reach requisite levels of arrivals volume. Equally importantly, its much-needed road infrastructure improvement will play a strong role as the key connection point between non-EU Balkan states and Turkey to the rest of Europe. High-speed train connection between Belgrade and Budapest set to be built by and with Chinese capital will shorten the trip to three hours from the current eight.”

Bucharest
In Romania, Bucharest is growing as one of Europe’s technology hubs.

“Bucharest will continue its growth as a distribution center for Southeast Europe for all industries, including global high-tech giants,” Gomola said.

He added that Bucharest, being the capital of the second largest country in the region, requires significant infrastructure investments, which he said “will no doubt play an important role in the continued fast-paced growth of the Romanian economy.”

Budapest
A supply boom is in Budapest’s future, Gomola said.

“Budapest will grow on the back of the most dedicated tourism leadership and government funding ever seen by the industry in Hungary,” he said. “The city has all the ingredients to catch up with Vienna and Prague in hotel capacity from its current 20,000-plus rooms to the 35,000-plus mark offered by the neighboring competitors.”

He noted the city is looking to add 9,000 hotel rooms through 2025, but that “will still leave room for growth to meet the challenge.” Infrastructure investments will help the city host cultural experiences and global sporting events and add a 2,000-seat conference center in 2021, he said.

Barcelona continues its moratorium on new hotel development, at least in the center of the city, which has pushed up rates, but locals say the city to become more livable curbs on tourist numbers have to be instigated. (Photo: Terence Baker)

Challenged market: Barcelona

Residents of the capital of the Spanish region of Catalunya continue to decry what they see as too much uncontrolled tourism.

“Barcelona is a global magnet for tourism. The number of international visitors continues to grow annually at a rate of close to 5%,” said Bruno Hallé, partner and co-director at business consultancy Cushman & Wakefield Hospitality Spain.

The other side of the coin, he added, is “reflected in hotel key performance indicators, which show growth in both revenue per available room and ADR. The outlook seems highly positive.”

Hallé noted the municipal government is continuing its moratorium on new hotel projects in the city center and encouraging hotel development in metropolitan districts such as Badalona, L’Hospitalet and Sant Adrià del Besós.

“Only three new hotels will open during 2019. The moratorium has diverted investment to other cities and superheated the prices of existing hotels, hindering possible sale transactions,” he said.

Amsterdam’s canals, Red Light District and famous museums have seen record numbers of tourists, and some in this Dutch city say enough is enough. (Photo: Terence Baker)

Challenged market: Amsterdam

Famous for its canals, museums and Red Light District, Amsterdam has seen visitor numbers increase dramatically.

According to the city’s tourism statistician Amsterdam & Partners, in the first four months of 2019 the number of overnight hotel stays increased 12.5% compared to the same period in 2018, with those overnights from international visitors rising 14.1%. Leisure travelers increased 16.2%, while business travelers rose by 5.2%.

According to website Amsterdam.org, that translates to 5.34 million tourists a year, 4.4 million of whom are international, in a city center of 840,000 people and in a metropolitan district of 2.3 million.

One way in which Amsterdam officials have sought to combat the issue of overtourism has been to impose an €8-per-person tax for every 24 hours spent there by cruise ship passengers.

Janine Fluyt, interim head of marketing at Amsterdam Museum, said the term “overtourism” must be considered carefully as cities are becoming more crowded not only due to visitors, but also because of new residents.

“The pressure on cities is growing because more people come to work, study and live there, more companies decide to locate there and more people are able to travel and visit,” she said.

Some of the ways Amsterdam is tackling the problem, she said, include:

  • making public spaces more spacious with auto-free zones or underground bicycle parking;
  • limiting the size of guided groups;
  • assessing taxes on various tourism and city uses;
  • increasing ways to make the city more livable;
  • promoting lesser-known attractions and neighborhoods for both first-time and repeat visitors;
  • marketing online the wide possibilities of the city; and
  • increasing efforts around the city’s “Enjoy and respect” campaign.

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