Which cities are best placed to grow in 2018 and 2019?
In 2018, Porto leads the growth pack with over 10% RevPAR (revenue per available room) growth anticipated; Amsterdam, Lisbon and Prague could see around 7% RevPAR growth and further robust gains are expected in Milan and Paris. Geneva and Rome are also forecast to see some moderate growth. But the pace of growth is expected to slow in London in 2018, as the weak pound effect fizzles out and a supply spike dampens occupancy. Paris has shown sustained recovery and shares the top spot on the growth chart in 2019 with Lisbon, with around 6.5% RevPAR growth expected for both cities.
Which cities will be the most expensive, the fullest and have the highest RevPAR?
Our research shows that while growth remains a dominant theme, it’s not just about growth rates and the absolute levels of trading are a key piece of the hotel jigsaw in each city. Analysis of three key metrics in absolute terms shows a very different picture:
Highest occupancies - forecast to be in London in 2018 (despite high supply additions) and Amsterdam (also despite high new supply), both with approximately 82% occupancy in 2018
Highest ADRs (average daily rates, €) - in Geneva (approximately €242), Paris (€236), Zurich (€197) and London (€162), in 2018
Highest RevPARs (€) - Paris tops the charts in both 2018 (€176 RevPAR) and 2019 (€188 RevPAR). Geneva and Zurich follow and London takes fourth place this year.
We anticipate relatively upbeat global growth in 2018. Growth is on track to be the fastest since 2011 and could grow by almost 4% in purchasing power parity (PPP) terms, adding an extra $5 trillion to global output in current value terms. More importantly, we expect growth to be broad based and synchronised, rather than dependent on a few countries. In the Eurozone, peripheral Eurozone economies are expected to outpace the core. Both strong wage growth and high employment should support leisure and travel spending.
Stellar global travel demand drove 671m international overnight visitors to Europe in 2017, driving record hotel metrics. Besides the strong demand from intra-European markets, US, China and the Russian Federation contributed significantly to growth. Another record year is anticipated in 2018 and there is no sign the boom is running out of steam yet.
Supply growth has remained relatively constrained in many destinations across Europe and this has allowed occupancies to soar, driving up ADR. Smith Travel Research report that Europe has see seven years of limited supply growth together with mainly good demand growth - an ideal backdrop for hoteliers. But how long can this continue?
Deal talk
European hotel transaction volume reached €20.9 billion in 2017. This was an 11% increase compared to 2016 deal volume and surpassed the record level achieved in 2015. This growth was driven by a resurgence in UK hotel investment activity in 2017 and record levels of investment in the Spanish hotel market. The start of 2018 has seen a strong level of investment activity in the UK and Spanish markets. Put together with the continued European and international interest in the German hotel market, we anticipate European hotel transaction volume to moderately increase in 2018 from 2017 levels.
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