European Hospitality Sector Outlook 2024 - Extended Version

GAS LEFT IN THE TANK

AIR CAPACITY IN EUROPE IS RECOVERING, DRIVEN BY DOMESTIC DEMAND

AIR SEAT CAPACITY AND DEMAND INDEX 2023 VS 2019 EUROPEAN AIR SEAT CAPACITY & DEMAND INDEX

130

121%

120

115%

110

With the economies slowing down, inflation eroding real disposable income and surplus savings depleting, there are obvious concerns about hotel performance going forward. While these are serious headwinds, there are several reasons for optimism: • The labour market remains healthy, and consumers still have some excess savings. The unemployment rate across the euro area in September 2023 remained relatively low at 6.5%, just a 0.1pp increase from August and 0.2pp below the same time last year. Nominal wages in H1 2023 grew by 4.5% in Europe and by 5.3% in US (important source markets). Plus, according to analysis by Financial Times i , there still may be over 25% of excess savings left in the US, and Europeans are reported to hold even more surplus savings ii , albeit partially in illiquid assets. • Euro currency is likely to regain some ground against USD, but visits to Europe will continue to be attractive for American travellers compared to pre-Covid era of strong euro. The real winners are likely to be UK hoteliers, with Sterling expected to remain weak, making the country less pricey for both European and US visitors.

• For many consumer groups, travel is moving away from being just “nice-to-have” discretionary spending and leaning towards the basic-needs category. This changes the views on how radically the economic slowdown could impact the hospitality sector and, to some extent, explains the recent resilience. Several consumer surveys indicate a continued desire to travel despite the economic challenges. According to the European Travel Commission’s (ETC) latest report, 71% of Europeans choose SiteMinder found that 91% of travellers intend to travel over the next 12 months at least the same amount as they did over the year past. Most (57%) intend to travel more iv . Another study by Hilton Worldwide v found that 64% of global travellers would reduce their personal spending to prioritise leisure travel in 2024. This is reflected in the latest hotel performance and positive tourism outlook despite the headwinds. to either maintain or boost their travel expenditures iii . Hotel commerce platform

• Hotel occupancy in Europe reached 76% in Q3 2023, just 3pp below 2019, while average room prices climbed to EUR 158, impressively 33% higher than in 2019, surpassing the Euro inflation. This is unlikely to reverse anytime soon. According to the latest CityDNA Barometer Report, vi which is based on the most recent air ticketing data, tourism activity in the key European markets is reaching pre-pandemic levels in Q4 2023, with Madrid experiencing a 9% increase in international arrivals compared to the same period in 2019. London (-2%), Dublin (-2%), and Rome (-3%) are projected to reach almost pre-pandemic arrival levels. Urban markets in southern Europe, such as Lisbon and Athens, are set to see double-digit growth in Q4, increasing by 13%, with Istanbul and London also rising strongly on the list of most recovered cities. • Also air seat capacity for inbound travel to Europe nearly reached pre-pandemic levels during Q3 and is on an upward trend ahead of Q4, reaching 96% and 82% of 2019 levels in Western and Eastern Europe, respectively (mid-November). According to Airport Council International, European airport passenger traffic is expected to surpass 2019 by 1.4% in 2024 and 3.9% in 2025 Vii .

100

92%

90

90%

80

JAN FEB MAR APR MAY JUN JUL AUG CAPACITY DOMESTIC CAPACITY INTERNATIONAL DEMAND DOMESTIC DEMAND INTERNATIONAL

Source: IATA / UNWTO / ACT

PASSENGER TRAFFIC RECOVERY INDEX AUG 2023 VS AUG 2019

100%

0%

124% 119% 114% 112% 111% 111% 110% 109% 108% 105% 102% 101% 101% 98% 89% 87% 85%

NAPLES PORTO MILAN BGY ISTANBUL IST PARIS-ORLY MARSEILLE MALAGA ISTANBUL SAW

ATHENS LISBON PALMA DE MALLORCA ANTALYA DUBLIN LONDON HEATHROW AMSTERDAM-SCHIPHOL PARIS-CDG FRANKFURT

Source: IATA / UNWTO / ACT

12 HOTELS OUTLOOK 2024

THE TIDE IS TURNING AMALGAMATED | 13