2018 forecasts for Europe hotel markets

Hotel-industry performance predictions are noticeably more sober at the beginning of 2018 than they were 12 months ago, according to sources.

The United Kingdom hotel industry gathered yesterday for the first time in 2018 at the 13th New Year Hotel Investment Summit, hosted by business advisory host Whitebridge Hospitality. Whitebridge Director Philip Camble undertook the gritty business of estimating revenue per available room and market capitalization shifts.

Camble also noted expectations that the third runway at London Heathrow Airport will be given final approval this year, and predicted there will be a backlash against technology and the behemoth companies behind it.

But on the main theme of RevPAR, Camble presented forecasts by Whitebridge that in at least one case contradict those of STR’s managing director Robin Rossmann, his fellow presenter at the investment summit. (STR is the parent company of Hotel News Now.)

“London RevPAR will decline by no more than 2%,” Camble said, “which is more pessimistic than forecast by STR.”

Speaking before Camble, Rossmann predicted London 2018 RevPAR to be flat, which he emphasized would still be regarded as an admirable performance.

Camble was more upbeat in terms of RevPAR for U.K. South Coast resorts and U.K. seaside locations, which he predicted would grow by at least 6% and 2%, respectively.

He also said he believes 2018 will be a year in which the stock market puts its muscle behind hotel groups, rather than online travel agencies.

That would not mean a drop in the market capitalization of OTAs, but he did say that while OTAs would see a stock-market value increase of more than 25%, the equivalent rise in that of the hotel industry would be more than 80%.

Europe tops the table
Rossmann said in terms of full-year 2017 RevPAR growth, Europe ruled the roost with a 6.4% increase.

“That RevPAR performance is by the far the highest, and it is not often Europe is top of the leader board and twice that of the U.S.,” he said.

There was more sweet noise emanating out of Europe, he added.

“Occupancy in 2017 is now almost 10% above the previous peak. That does not sound like a lot, but it is huge … and despite all the headwinds,” he said, referring to the terrorism incidents and general elections prevalent in the past 12 months.

Rossmann said STR predicts full-year 2018 RevPAR for Europe will grow 5%, not as strong as 2017, “but still a good year.”

For the U.K., there is a sense that the “juice had run out … driven by sterling weakness,” he said. “As a result, demand is waning and occupancy is declining.”

There was better news for regional U.K. and the Scottish capital, Edinburgh, which Rossmann predicted would see full-year 2018 RevPAR growth of 3.9% and 5%, respectively.

Thoughts on terrorism
Rossmann said most of the markets affected by terrorism incidents in 2017 and previous years have rebounded in performance.

Only Paris and Brussels are not quite back to where they were, though both are expected to see full-year 2018 RevPAR increases of approximately 7%, he said.

Terrorism incidents in London, Barcelona, Berlin and Manchester appear to have had no adverse effects on the hotel industry, Rossmann said, though “yes, they might have done better.”

Tunisia, hit by terrorism three years ago, has rebounded, as has Nice in France, and Istanbul’s rebound was helped by the lifting of Russian sanctions and travel bans, he said.

Two shining stars in Europe, he said, were European Mediterranean destinations and Ireland’s capital Dublin, where full-year 2018 RevPAR is forecast to grow 3% despite new supply coming online. RevPAR has risen in Dublin by 104% across the full years 2011 to 2017, Rossmann said.

Demand is also expected to outpace supply in Eastern Europe in 2018, he added.

Thoughts on transactions
Camble said London returned to the top of the European transactions value table in 2017, buoyed by the £600-million ($812.51-million) sale of the JW Marriott Grosvenor House to Ashkenazy Acquisition Corp.

Second was Spain, which saw 14 assets scooped up by Blackstone (3,700 keys) from Hotel Investment Partners in October for a reputed €630.70 million ($753.19 million). Third was Regional U.K., where the biggest deal for the year was the purchase of Jurys Inn by Fattal Hotels and Pandox AB for £800 million ($1.08 billion).

“In London, this virtual city-state we live and work in, the biggest change was the return of private equity,” Camble added.