INTERNATIONAL REPORT—Germany is experiencing many positive factors that bode well for the hotel industry, according to hoteliers operating in the country.
The economic stability of Germany cannot be underestimated. Hosting the World Cup in 2006 contributed to a favorable view of leisure travel to the country, said Konstanze Auernheimer, director of marketing and analysis for London-based STR Global, a sister company of HotelNewsNow.com.
Tourism is showing healthy improvement, as Germany ranks as the second most popular destination worldwide for Europeans as of 2010 and first in the European Union, according to the German National Tourist Board. It had the highest growth rate in number of trips (11%) over 2009.
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Maarten Markus, NH Hoteles |
“The German economy—‘Wirtschaft’ as we say—is recovering tremendously,” said Maarten Markus, business unit director, Central Europe, for NH Hoteles. “And because of that, lots of travelling of all kind of business people–which means more occupancy in our hotels.”
Germany is the most popular business travel destination for Europeans, with 10.7 million trips in 2010, according to the GNTB and World Travel Monitor. Of those trips, approximately 53% of trips were traditional business trips, 24% were for conferences/congresses, another 22% were for trade fairs and exhibitions, and 1% was incentive trips.
Germany’s hotel metrics show modest growth. For June 2011 year-to-date, occupancy was 62.5% (a year-over-year increase of 3.7%), average daily rate was up 2.2% to €93.65 (US$135.67) and revenue per available room was up 6% to €57.90 (US$83.88), according to STR Global.
The active development pipeline has a total of 13,186 rooms as of July, according to STR Global. This would add on to the existing supply in Germany of 530,091 rooms.
A global priority
Germany is one of IHG’s five priority markets globally, according to Martin Bowen, associate VP development at IHG. The company has 70 hotels in Germany with a total of 14,780 rooms.
“We’re focused on growing the Holiday Inn, Holiday Inn Express and Hotel Indigo brands in Germany where there is significant headroom for growth,” he said.
IHG will open the 81-room Hotel Indigo Berlin Hardenbergerstrasse towards the end of this year and Hotel Indigo Alexanderplatz with 152 rooms and the Hotel Indigo Hamburg St Pauli with 94 rooms are due to open at the end of 2012.
“In total, we have 19 hotels (2,831 rooms) across our family of brands in our pipeline which are due to open in the next few years. Of these, there are four Holiday Inns and 12 Holiday Inn Express properties,” Bowen said.
For NH Hoteles, which has 61 hotels with about 10,000 rooms in Germany, the key segments in the country are corporate business and the meetings, incentives, convention and exhibition segment, according to Markus.
Room to grow?
With a lowered value-added tax rate and an ADR that is lower than comparable hotel markets, it might be suggested that Germany has room to grow on rate, but Auernheimer said that can be difficult because it’s largely a domestic market, so travelers don’t care that it’s cheaper than cities such as London. “That makes it kind of tough to move anything,” she said.
NH’s Markus also said rate has some room to grow compared with other European markets and suggested the booming market has driven increased price competition.
“Every hotel chain that is already present wants to increase its presence in the country,” he said. “Chains who are not present are opening new hotels as to also pick a piece of the (German) pie.”
Bowen said construction costs are on the rise and there is a short supply of land for new builds.
“Finance availability continues to challenge our partners but we know that lenders prefer to work with strong brands and they are aware that we have a history of delivering above average returns to owners,” he added.
The instability of members of the European Union presents some uncertainty, Markus said.
“This remains an economic risk and could have a huge impact on the occupancy and rates of our hotels,” he said.