European Hospitality Sector Outlook 2024 - Extended Version

LOOKING INTO A CRYSTAL BALL

LOOKING AT CRYSTAL BALL

Austria and Greece leading the growth, granting all countries are expected to overpass 2019 volumes. A constrained supply should provide room for price increases in most markets, except in those that anticipate a more notable pipeline influx. Amex GBT Hotel Monitor indicates that hotel prices are trending upwards in 2024 (7% on average), albeit with reduced velocity compared to 2023.

HOTEL ROOM RATES TRENDING UPWARDS IN 2024 FORECASTED ROOM RATE GROWTH IN 2024 - SELECTED URBAN MARKETS

It is hard to predict the future, but so far, the forward-looking indicators, such as hotel bookings and flight reservations, are better than last year. Oxford Economics expects the demand for nights in European hotels in 2024 to surpass pre pandemic levels by 9.2% on average, with Turkey,

10.0%

9.4%

FORWARD-LOOKING INDICATORS SUGGEST HOTEL DEMAND GROWTH IN EARLY 2024 VS 2023 (% CHANGE, OCT 2023 VS OCT 2022)

PARIS

DUBLIN

LONDON

MUNICH

ROME

EDINBURGH

FLIGHT RESERVATIONS

HOTEL BOOKINGS

BRUSSELS

AMSTERDAM

BERLIN

BARCELONA

MANCHESTER

MADRID

31%

Source: Amex GBT Hotel Monitor, October 2023

28%

However, nothing lasts forever, and given the mounting economic and geopolitical headwinds, performance growth is bound to slow down. The historically strong RevPAR growth will likely moderate in 2024, with occupancy continuing on a recovery path, but gaining mostly in shoulder season, given the already high levels in high season. This, combined with the return of corporate travel will introduce lower-rated bookings into the mix and ultimately erode the overall ADR growth. Flow through to the bottom line (GOP) will be more challenging but still positive, aided by reducing energy costs. Moderating income growth might not be sufficient to compensate for continued yield decompression as the impact of increased interest rates is still filtering through the valuations. Thus pricing might remain under pressure until the interest rates start declining which is expected in the second half of 2024. Until then, smaller deals below EUR 30 million

are more likely to transact due to lower reliance on debt, flexibility in decision-making, and less IRR-driven investment strategies. Conversely, larger portfolio M&A opportunities also attract interest, as lenders and investors are keen to write larger cheques on single transactions – however, the fate of such deals launched earlier this year remains to be seen. Due to the large amount of hotel debt maturing in 2024, some activity will come from refinancing events, where lenders scrutinize loan-to-value ratios (LTVs) and debt service coverage ratios (DSCRs) amidst the ongoing repricing in the market and income volatility. The distress will not be widespread but rather manifest sporadically as loans mature, prompting case-by-case solutions to be sought.

18%

10%

9%

7%

6%

1%

SOUTHERN / MEDIT EURIOPE

CENTRAL / EASTERN EUROPE

NORTHERN EUROPE

WESTERN EUROPE

Source: UN WTO, Forward Keys, Sojern

HOTEL DEMAND IN 2024 IS EXPECTED TO SURPASS 2019 IN ALL MAJOR MARKETS (NIGHTS IN HOTELS, INDEX VS 2019)

142%

137%

100%

128%

128%

130%

119%

122%

109.2% 116%

115%

115%

115%

111%

112%

113%

110%

110%

128%

108%

107%

107%

107%

106%

105%

105%

101%

101%

101%

105%

102%

99%

98%

94%

100%

93%

107%

0%

TURKEY

PORTUGAL

UK

SPAIN

FRANCE

EUROPE

GREECE

AUSTRIA NETHERLANDS

POLAND

ITALY

GERMANY

Source: Oxford Economics

2023 2024 2025

18 HOTELS OUTLOOK 2024

THE TIDE IS TURNING AMALGAMATED | 19