THE PIPELINE : EUROPE
An
ongoing lack of financing and economic instability threaten to reverse two years of performance improvements across Europe ’ s hotel sector , but a development pipeline that has slowed should help ease occupancy woes . Meanwhile , international brands are finding it easier to enter Europe ’ s traditionally independent hotel industry with white-label marketing programs and co-branding initiatives joining small-chain acquisitions and conversions as the brands ’ primary growth vehicles .
GDP growth — strongly correlated with RevPAR — is expected to be minimal across much of the Eurozone this year , and some economists believe it may even recede . A slowdown in occupancy , ADR and pipeline growth seems likely across much of the region , London consultancy Fitch Ratings predicts , in addition to a widespread weakening of both business and leisure demand .
Europe ’ s largest hotel markets , Paris and London , each saw impressive year-overyear performance gains in 2011 . Hoteliers in both cities are optimistic about this year , thanks largely to the London Olympics in July . London and Paris are projected by PwC to rank first and fourth in Europe , respectively , in occupancy for 2012 .
The largest continental Europe-based hotel company , Accor , reports RevPAR growth across nearly all of its regional markets for the latter half of 2011 , but is still bracing for a difficult operating environment in 2012 .
On the upside , travel to Europe from the growing middle classes in the emerging BRIC markets ( Brazil , Russia , India and China ) is offsetting diminished regional travel , with newfound leisure business helping the upscale segment in many European gateway cities . “ New demographics now have ability to travel , which will boost Europe from leisure travel , and that will replace lost business travel ,” says Marc Socker , director of hotel fund management for Invesco Real Estate , London .
Financing challenges Availability of debt , or lack thereof , remains the chief bogeyman for the European hotel industry , and financing from traditional sources likely will continue to be in short supply through 2012 .
“ Banks have generally come under renewed pressure to deleverage , and this has meant significant cutbacks on new lending ,” says Charles Human , managing director of London investment banking firm HVS Hodges Ward Elliott . “ Those that are willing to extend new loan finance have a strong preference for trading hotels with a proven cash flow and a strong bias towards prime hotels in gateway markets .”
Still , experienced local developers in mature markets who have strong
St . Regis Florence Doubletree Amsterdam is a conversion from a Mint hotel . www . hotelsmag . com March 2012 HOTELS 31