European Hospitality Sector Outlook 2024 - Extended Version

THE RESILIENT NATURE HOTEL PRICE PER ROOM INDEX (HEDONIC SERIES, INDEX VS 10YR AVERAGE) RESILIENT HOTEL VALUES IN EUROPE SELECTED COUNTRIES

130% SELECTED REGIONS AND LONDON

90% 100% 110% 130% 120%

120%

Whilst there has been notable yield decompression, the values of hotels across Europe are somewhat enduring. According to the hedonic data series by RCA, the values of hotels across Europe have increased by 14% in Q3 2023, relative to 2019. This seems too good to be true, but in some markets, it is plausible, thanks to healthy income growth that exceeded 20%, despite the intense cost pressures, especially in the case of utilities and wages. As hotels typically command relatively high operating margins, frequently above 35%, the costs would have to grow substantially faster than the revenues to start reducing profits. So far, this has been the case only in markets suffering from constrained revenue growth, such as in the CEE region affected by the Russian war against Ukraine. But even in this area, the latest figures show continued performance recovery. However, the RCA data indicating growing hotel values across Europe may be optimistic. Many recent sales were prime assets in core markets, and several were trophy hotels with high prices per room. This is likely skewing the data upwards, as in many markets, the hotel yield decompression has been stronger than income growth.

90% 100% 110%

"

80%

80%

70%

70%

60%

60%

Many recent sales were prime assets in core markets, and several were trophy hotels with high price per room.

50%

50%

Q1 Q3

Q1 Q3

‘08 ‘10 ‘12 ‘14 ‘16

‘18

‘20 ‘22 ‘23

‘08 ‘10 ‘12 ‘14 ‘16 ‘18 ‘20 ‘22 ‘23

SPAIN

UK FRANCE

GERMANY

ITALY

ALL EUROPE WESTERN EUROPE

GREATER LONDON

Source: MSCI Real Capital Analytics (Hedonic series)

HOTEL REVENUES ARE ABOVE 2019 LEVELS IN MOST MAJOR CITIES ACROSS EUROPE

(REVPAR YTD OCT 2023 VS YTD OCT 2019, INDEX)

PARIS

ROME

MILAN

BERLIN

LISBON

DUBLIN

VIENNA

ATHENS

MADRID

EUROPE

PRAGUE

LONDON

HELSINKI

WARSAW

ISTANBUL

BRUSSELS

BUDAPEST

BARCELONA

AMSTERDAM

MANCHESTER

COPENHAGEN

158

154

143

144

135

126

121

125

125

122

119

118

115

114

113

112

122

108

107

92

75

Source: STR Global (based on data in EUR except UK markets that are based on values in GBP)

HOTEL OPERATING PROFITS ARE ABOVE OR NEAR 2019 LEVELS IN MAJORITY OF MAJOR CITIES ACROSS EUROPE

PROFIT (GOP) CHANGE % REVENUE CHANGE %

(31%)

(41%)

LONDON (41%)

(45%)

DUBLIN (37%)

MADRID* (35%)

(39%)

WARSAW (29%)

EUROPE (37%)

BRUSSELS (24%)

(42%)

MUNICH (43%)

VIENNA (45%)

(29%)

PARIS

(43%)

(29%)

CITIES

MILAN

BERLIN

EASTERN

58

ALL MAJOR

EDINBURGH

BARCELONA

AMSTERDAM

50

MANCHESTER

32

27

25

23

24

23

21

22

12

19

18

18

18

8

8

15

5

4

12

11

10

1

-1

-5

-7

-8

-10

-17

-18

-20

(Based on PAR values for YTD Oct 2023 vs YTD Oct 2019)

Source: HotStats (based on Gross Operating Profit per available room (PAR) in EUR, sample of full-service branded hotels in city centres, data in brackets represent GOP margin in YTD October 2023, *whole market)

10 HOTELS OUTLOOK 2024

THE TIDE IS TURNING AMALGAMATED | 11