Thomas Emanuel, Director of Business Development at STR Global, kindly shares some insights on hospitality figures Q1 2016 with our Newsdesk Editor.
- The hospitality sector performed well in 2015, with serviced apartments achieving overall achieving 83.6% occupancy, but Q1 2016 has seen a slower start. Can you explain some reasons for the drop in occupancy to 75.5 % and lower RevPAR in Q1?
The biggest challenge facing the hospitality industry is the balance, as ever, between supply and demand. In this dynamic sector, more hotels and serviced apartments are being developed or redeveloped and opened all over the world, whereas in some regions, demand has not always kept up globally.
Drilling into the figures we see demand for serviced apartments in Q1 has fallen against this time last year by 2.1%, while supply has risen by 1.3%. Hotels likewise face this challenge, with demand increasing by just 0.3% and supply growing by 2.2%.
On the positive side, rates are generally rising, faster in the serviced apartment sector than anywhere. Operators are reacting to falling demand by continuing to push average rates, and therefore making RevPAR figures more palatable.
There are many reasons globally for the falling demand, and they don’t only affect hospitality of course. But the increased threat of terrorism cannot be ignored. We have recently seen a decline in travellers to certain parts of the globe seen to be especially vulnerable. Turkey, for instance, and Egypt. And in Europe, the attacks in Paris and Brussels not only hit those cities but had a knock-on effect elsewhere, including London. More tourists may be heading for mainland Spain and Portugal for their sunshine breaks, and avoiding some perceived danger hotspots, but globally many cities and wider regions are suffering slight declines in inbound travellers.
And of course, nobody knows yet what the outcome of the US elections and the UK EU Referendum will be, or what effect both votes may have on travel and tourism. Whatever the outcome, there is a certain amount of unease until we know better what the future holds and this may affect inward investment and confidence within the whole hospitality industry.
- Can we look in more detail at key cities reporting a decline – for example in Aberdeen the decline is very significant? STR’s data confirms hotel occupancy is down 18% in the city in Q1.
There are many issues facing Aberdeen specifically that don’t affect other cities in the same way, including the significant downturn in the North Sea oil industry. As the price of oil plummeted, up to 65,000 workers were left without jobs and something like that has to have a knock-on effect on a town. From lack of in-bound workers needing somewhere to stay, to shortage of tourist visitors and less money generally within the community, the hospitality industry has been hit hard – at least, until the price of oil reaches profitable levels again. It doesn’t help that hotel supply has risen fast, by 7.5% – again, outstripping demand.
But Aberdeen is far from unique in this. Lots of UK cities have felt the same strain. Bristol has seen an increase in hotel supply of 5.1%, Glasgow 6.1%, Liverpool 8.3% and Southampton 7.1% and in all those cities, however vibrant they may be, demand for rooms has simply not kept pace recently.
There are some pockets around the country doing well, though. Manchester and Birmingham are two cities with a very buoyant pipeline, having strong corporate bases and local infrastructure development, making them prime for both corporate and leisure visitors.
- Looking forward to Q2, obviously April’s figures are still to be finalised, but do you have any insight on Q2 for the UK?
As far as serviced apartments are concerned, everything is still looking robust. In key cities, occupancy is still generally above 75% and investors are viewing the market with interest. Across the wider hospitality industry, we are forecasting for 2016 a slight downturn in RevPAR in London, but an increase of anything up to 6% across UK regional cities.
- Can you share any insights around the Q1 performance in the rest of the world, so in the US and Canada? How are things faring in Europe, especially Germany where supply is increasing strongly? And the wider world?
This year to date, for the hospitality sector as a whole (including serviced apartments) RevPAR (in Euros) in Germany has increased by 2.9%, and there’s a steady rise in supply although actually less than in the UK. Across the rest of Europe as a whole, RevPAR is generally pretty robust, with an increase of 3.1%. Most countries are faring well, although there are some particularly strong pockets of growth – Ireland for example is enjoying double-digit RevPAR growth, along with Portugal, Spain, Russia (mainly domestic travel), Croatia and the Czech Republic. Although again this is about rates rather than occupancy.
Equally there are pockets of decline. As mentioned already, terrorism is having an effect on some territories. Belgium and France are still suffering after recent attacks, likewise Turkey; and Switzerland is struggling with high-cost currency issues.
In the US and Canada we see a growth in RevPAR, again rate-driven with occupancy slightly down.
Meanwhile globally there are other emerging markets. Pockets within Asia Pacific are healthy, such as Japan, and also New Zealand, where there’s a lower supply of rooms. India, Thailand and Malaysia’s fortunes are bouncing back, although India and China’s growth is flat. In the Middle East and Africa it’s a mixed picture with generally new supply and less demand, and fears around the whole oil industry. Anywhere dependent on oil or at risk from war or terrorism is struggling.
Egypt and the whole Red Sea region are worrying due to the continued terror threat, however South Africa is booming due the weak Rand, making the destination very affordable for overseas visitors.
- On a different note, what impact do you believe Airbnb is having on our sector?
The recent report on HotelNewsNow.com analysed the available data on Airbnb’s presence specifically in London. It makes very interesting reading, especially around statistics by borough, although it will never be an exact science as owners list and remove units all the time and there’s no accessible figure on actual rate achieved.
What it does show is that more than half of all Airbnb listings in the capital are for a whole house or apartment – whereas originally, the concept was around sharing accommodation. When the available rooms are analysed, it seems safe to say that around 8% of all available hospitality bed spaces in London are Airbnb and 92% hotels, including serviced apartments. One borough, Westminster, has so many visitors it holds 27% of all London hotel rooms and 17% of all Airbnb listings.
But Hackney fares less well – it has 11% of all Airbnb’s London listings but only 1% of all available London hotel rooms, which seems to imply that where there’s demand, Airbnb can, and will, supply.
Overall, what the report does conclude is that it’s time to accept the sharing economy, and while it may face opposition and regulation in pockets around the world, Airbnb is here to stay.
- Finally, with so many developments within the hotel sector towards holiday rentals, and so much going on in the serviced apartment sector, do you have any insights around where the industry is heading this year?
There will always be innovative leaders within the hotel industry looking for opportunities, and these have given rise to lots of consolidation and acquisitions, Accor purchasing onefinestay and Choice Hotels going into the vacation rental market for instance. Aparthotels are opening right across the globe, and hotels are having to adapt to meet the challenge.
And the domestic and international leisure markets are growing massively, with increased demand for accommodation outside the business week; and of course serviced apartments are prime territory for families travelling together.
I can only say that the serviced apartment sector is certainly booming. There are daily announcements of new openings and investment in developments around the world.
It’s an exciting time for the whole hospitality sector, that’s for sure – never a dull moment!