A look at COVID-19’s erosion of European markets
A look at COVID-19’s erosion of European markets
01 APRIL 2020 8:51 AM

As the impact of COVID-19 erodes hotel performance in Europe, there is some hope that performance metrics have fallen as low as they can.

LONDON—Europe is at the epicenter of the COVID-19 outbreak, and the impact of the virus is reflected in its hotel performance, according to sources.

That impact is so significant that China and Europe are already showing steeper declines in terms of year-over-year revenue per available room (1 January-22 March) than during the financial crisis of 2008 and 2009.

Robin Rossmann, managing director of Hotel News Now’s parent company STR, said during a webinar focused on Europe that the situation is worse than feared.

“It is fair to say that in regards to Europe we have hit the bottom,” he said.

Some forecasts across the hotel industry are much rosier, Rossmann said.

“The best-case scenario I have heard is that of Barry Sternlicht, chairman and CEO of Starwood Capital Group, on Bloomberg TV when he said this will be a 90-day World War III, and we will see bounce-back relatively quickly,” he said. “However, there are people who are more pessimistic. Most economists expect a global recession, a deep recession that is more painful than the 2008/2009 financial crisis.”

Rossman added one prognosis included a gross-domestic-product decline in the United Kingdom of between 5% and 15%.

Hope comes from China, where Rossmann said 87% of hotels are back online following mass closure in January.

“(Europe has) about two months to get back to that picture, if not longer. (COVID-19) cases flatlining will be the first indicator of a recovery in (rooms) demand,” Rossmann added.

Aoife Roche, director of account management at STR, said Europe occupancy declines have accelerated in the last two weeks and RevPAR noticeably decreased in the week beginning 16 March.

“(RevPAR) is worsening to 85% to 90% declines across most major cities. Italy is virtually at 0% occupancy,” Roche said, who added the decline is looking particularly stark in the U.K.

“At the bottom, average daily rates in most markets are all showing up to 80% declines. Forward booking has collapsed,” she said.

Not good
Whereas London and Dublin usually lead U.K. and Ireland performance in good times, both markets are now experiencing the sharpest declines.

Source: STR, © 2020 CoStar Realty Information, Inc.

Occupancy in both London and Dublin is down 80%, although the worst-performing market is Belfast, which a month ago was showing signs of a boom.

Since the global spread of coronavirus, the U.K. government has put financial packages in place to help hoteliers, employees and the economy.

Roche said Eastern Europe was showing an even bleaker landscape, with Prague leading the way across all of Europe with a 97% occupancy decline followed by Tallinn (-96%) and Bucharest, Budapest and Sofia (all at -93%).

Source: STR, © 2020 CoStar Realty Information, Inc.

Russia is faring better, Roche said, with occupancy down in Moscow by 66%, in St Petersburg by 63% and in Sochi by a (healthy) 30%.

Samantha Mardkhah, business development manager for Benelux and Nordics at STR, said parts of Belgium and The Netherlands were not performing any better, showing RevPAR decreases across the region between 82% and 95%, with the largest decline in Maastricht (-95%).

Source: STR, © 2020 CoStar Realty Information, Inc.

In country terms, Belgium (-92.2%) was faring worse than The Netherlands (-89%) in terms of RevPAR performance.

Group business is suffering, but Mardkhah said that so far “guests are holding back on canceling their summer holidays.”

The higher-end segments might suffer in both terms of leisure and group, Roche added.

“The luxury sector went into decline five or six days earlier as international trade started to dry up, and there is still business on the books that will have be dealt with, either canceled or postponed,” she said.

Rossmann said STR is gauging international travel appetite.

“Fortunately, we started this at the beginning of the year,” Rossmann said.

According to those surveyed before COVID-19, 16% of respondents said they would travel more and 53% said they would travel the same amount. Now, those numbers have dropped, but in the “more” category only by one percentage point.

“Thirty-five percent said they would travel the same amount, so there is some caution,” Rossmann said.

He added hoteliers need to focus on plans to get business for the summer months as pent-up travel demand will wish to travel beyond their houses.

Rossmann said two questions immediately come to mind. The first is increased scrutiny around large-group travel, with corporations likely to shy away from liability, tighten purse strings and scrutinize discretionary spend. The second is how the industry measures hotel re-openings, with a number being used to house medical and frontline staff and the homeless.

Click here for all STR data, webinars and presentations focused on COVID-19.

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