KEY OBSERVATIONS
14 April 2020
Our EMEA hotels team has put together a piece that delves into the questions of: If the current pandemic can not be curbed soon, and travel restrictions persist, what will it mean for the hotel industry?
Please click here to access the report.
30 March 2020
- With hard & soft ‘government lockdown’ measures in operation across EMEA, the hotel and hospitality industry continues to be very hard hit.
- Some government support is being made available at a national level to businesses in the sector, to protect hotel operators from insolvency. Meanwhile some hotels are providing support to national health services by adopting hotels and event space as temporary hospital capacity.
- Our hotels team based in the Netherlands has put together a report examining the trends and likely impact on the European market, based on the base case scenarios first published on this microsite.
Please click here to access the report.
Market context
Immediate Impact
Tourism & Travel Dependency
Market Recovery
- Before we look at the immediate and potential impact of the COVID-19 outbreak on the tourism, hospitality and hotel industry, it is worth putting this in the context: occupancy and ADR’s had been steadily expanding in Europe for the last few years, even though growth rates were slowing in 2019 in response to additional room supply coming to market. That said, occupancy rates were at very healthy levels for the vast majority of European city markets at end 2019, based on analysis provided by CoStar (STR). While the February numbers provided some base for cautious optimism, travel restrictions have seen occupancy rates wiped out almost completely in March.
- The immediate impact of the COVID-19 outbreak, however, has been significant. With major business events being cancelled, many more cancellations on the horizon and a moratorium on business travel for the rest of Q1 and most of Q2, the tourism and hotel market is going to suffer a significant shock.
- Analysis provided by CoStar (STR) shows that occupancy has already been severely curtailed in several major European markets. Subsequently, revenues have slumped across all markets, taking a particularly hard hit in the week commencing 16th March. Unsurprisingly so, considering the recent “lockdown” measures taken by many governments. A prolonged decline in occupancy is clearly going to hit the industry hard.
- While the short-term impact of a downturn in tourism will be flat everywhere, some markets look more exposed to it than others. As international air travel is curtailed, markets more prone to demand from international air travel are most likely most exposed to a sharp downturn. Markets that can function on domestic car based travel are probably the most resilient.
- There is, of course, a significant seasonality element to factor in here. Markets in the UAE may also fare reasonably, despite the drop in business travel demand, given that their holiday season is coming to a close. If the COVID-19 virus can be controlled over the next quarter, then the European summer season destinations of Greece and Croatia in particular could recover. If the COVID-19 virus is controlled, but travel remains restricted within borders, then countries that are driven more by car-based, domestic tourism are likely to be more resilient locations for business.
- Whilst it is too early to talk about a recovery while so much remains uncertain, a look back at the recovery of infected markets during the SARS outbreak of 2002 gives an indication. For the most infected cities of the time in China/Hong Kong, occupancy rates dipped significantly from the start of the outbreak in Feb/March 2003, but had recovered by September of that year. What this looks like for Europe in 2020 is uncertain, but there is a likelihood that some hotel projects will be delayed as occupancy and REVPAR come under significant pressure.
- Markets in the bubble currently represent those countries most exposed to tourism as driver of the national economy, and those currently most exposed to a downturn enforced by the spread of COVID-19. As the virus spreads, more markets will be exposed, some with more significant implications for the broader economy.
If you have any questions, please get in touch with the contacts below or email us at emea@colliers.com.
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DISCLAIMER
The analysis and finding reported on this microsite is based primarily on Colliers International data, which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other purposes. The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a “Global Pandemic” on the 11th March 2020, has impacted market activity in many sectors, creating an unprecedented set of circumstances on which to base a judgement. This report does not constitute and must not be treated as investment or valuation advice or an offer to buy or sell property. Given the unknown future impact that COVID-19 might have on real estate market supply, demand and pricing variables, we recommend that you recognise that our research and analysis is far more prone to market uncertainty, despite our endeavours to maintain our robust and objective reporting.
