European cities hotel forecast 2017 & 2018

The 6th edition of PwC’s European cities hotel forecast looks at the outlook for hotel trading in key cities in Europe, set against a backdrop of economic and travel growth but unprecedented levels of geopolitical uncertainty.

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Standing out from the crowd: spotlight on 2017 & 2018

Almost all the cities in this latest forecast are expected to see growth in 2017 and 2018. Strong demand has propelled some cities into the spotlight yet again while others have moved up or down the growth rankings. In 2017 Porto leads the growth pack with almost 15% RevPAR growth anticipated; Dublin could see 8.7% RevPAR growth and further robust growth is expected in Budapest, Madrid, Lisbon, Prague and Barcelona. We expect recovery to kick off in Paris and growth to return to London, buoyed by a weak pound.

Which cities will be the fullest and most expensive?

The highest occupancies

There’s no change in 2017 or 2018 with the highest occupancies forecast to be in the same two cities again. But Barcelona will enter the top 5 for the first time in 2017.

The highest average daily rates

There’s no change at the top of theADR rankings. In 2017 the highest ADRs in euro terms are Geneva (€300.2) Zurich (€244.9) followed by Paris (€229). Paris room rates remain high despite a 4% fall in 2016 and forecast further falls in 2017.

Economic, travel and supply outlook

Our latest projection is that GDP in the Eurozone will grow by 1.5% and 1.6% in 2017 and 2018 respectively. Growth in the US is also projected to pick up steam this year, and combined with a rising dollar, we may see increased numbers of US tourists flocking to Europe.

Europe recorded 12 million more tourists in 2016 than in 2015 – making a total of 620 million international arrivals – despite safety and security concerns. Some markets, like Spain and Portugal enjoyed an excellent year. For 2017, the UNWTO forecasts a further 2-3% growth. Travel and hotels should benefit from rising US purchasing power abroad.

Overall, Europe is expected to continue to see relatively low levels of new hotel supply growth despite some hotspots such as Berlin and London. Some popular tourist cities have tried to intervene and shape the market while some want to encourage hotel development. Serviced accommodation and shared platforms continue to compete for travellers and more legislation and taxation is likely to regulate this sector.

Where is the sharing economy heading in 2017?

For hotel companies, peer-to-peer rental and home-swapping platforms have re-defined how people travel and 2017 will see continued growth in this sector with leading platforms expanding their offerings into corporate event spaces, food sharing, and experiences. We think growth in the peer-to-peer rental stock could well continue to outpace hotel room supply in 2017. In this European Cities Hotel Forecast we predict and analyse 10 key sharing economy trends that will impact the hotels sector.

Deal talk

European hotel deal activity reduced by nearly 10% to c. €19bn in 2016 – still the second highest level ever recorded. The UK’s share of total transaction volume fell from c.60% in 2015 to only 25% in 2016 reflecting investor uncertainty surrounding the Brexit vote. Meanwhile the “safe haven” of Germany accounted for nearly 30% of transaction volume in 2016. We forecast similar levels of European hotel investment activity in 2017.

Contact us

David Trunkfield
Partner, UK Hospitality and Leisure Leader
Tel: +44 (0)20 7804 6397
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Liz Hall
Head of Hospitality & Leisure Research
Tel: +44 (0)20 7213 4995
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Samantha Ward
Hotels Sector Leader
Tel: +44 (0)20 7212 2974
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Nicolas Mayer
Hospitality & leisure leader, Switzerland
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