Hotel Market Germany 2019: Increasing competitive pressure despite record demand
Berlin/Frankfurt/Munich. Record. Once again, hotels and B&Bs in the largest German city destinations registered a demand increase. Simultaneously, however, the revenue per available room declined in 3 of these cities in 2019. Hotel real estate specialist Christie & Co reviews an eventful year in Germany's 6 key hotel markets Berlin, Munich, Frankfurt, Hamburg, Cologne and Dusseldorf.
For 10 years in a row, demand records have been breaking every year and in 2019, hotels and B&Bs in the 6 largest German cities recorded another overall increase in overnight stays of almost 5%. However, the market is also constantly changing in terms of supply. “In 2019 alone, an average of 50 new beds were added every day among all top 6 destinations”, explains Patrik Hug, Associate Director at Christie & Co. After the historic average 5-year demand growth having outpaced supply growth levels in the last few years, the trend was reversed in 2019 in Frankfurt and Hamburg, which was also reflected in a falling RevPAR.
In Frankfurt, the RevPAR fell by 4.3%, the largest performance decrease among the largest cities. In the 2015-2019 period, the number of beds available increased by c. 6.2% annually, while overnight stays have grown by only 4.9%. This has not only led to lower occupancy rates, the average daily rate also declined slightly, caused mainly by pausing trade fairs. Companion in misfortune Hamburg recorded a RevPAR decrease of 3.4%. Again, both the downwards evolution of occupancy (78%, -1.1%) and ADR (EUR 115, -2.1%) fuelled the overall decline. Especially in Hamburg, the pipeline remains very large, which is why the reopening of the congress centre in August 2020 is certainly much anticipated.
Munich also reported a mixed result. According to STR, the Bavarian capital experienced a RevPAR decline of 1%, although the number of overnight stays in hotels and B&Bs increased by well over a million to around 17.2 million (+6.8%). Supply, however, grew even stronger – the Statistical Office reported an increase of 5,475 beds compared to 2018, which is equivalent to an increase of 7.4%. While the trade fair calendar with BAU and bauma was still promising in the first half of 2019, the second half was disappointing, which led to a decline in the average rate to around EUR 126 over the whole year.
In Berlin, supply growth was kept in check by demand. The capital city still registers just over 530 hotel businesses. At the same time, the number of beds, however, increased by about 12,200 since 2015, which suggests the closure of several smaller hotels and the opening of new, larger, typically branded establishments. Overall, the revenue per available room in 2019 increased slightly to EUR 79, which was rooted in increased demand levels, especially in the months of January and May.
While Frankfurt, Hamburg, Munich and Berlin did not really get off the ground in 2019, hoteliers on the Rhine river had good reason to celebrate. In both Cologne and Dusseldorf, the performance was clearly in the black, after both cities lost ground in 2018 compared to 2017. Especially in these 2 cities the trade fair and the resulting peak demand days play a major role. In Dusseldorf, for example, RevPAR triggered by peak demand days rose by over 10%, although demand in terms of overnight stays increased by only 0.3%. As such, for instance, the 100th anniversary of the ANUGA in Cologne and the K2019 in Dusseldorf caused the tills to ring - thanks to overbooking, also in the other city.
All in all, the oftentimes mixed results can be explained by an increasing range of products on offer and the trade fair calendar. “The demand for trade fairs and events has been stable in recent years, so that the number of peak demand days, on which hoteliers traditionally achieve the highest prices, has been decreasing due to the increasing supply”, analyses Patrik Hug.
The pipelines remain well stocked in the key cities, and thus, short- and medium-term performance decreases are likely to occur not only due to trade fair and event calendars, but also due to new competitors. “The loser here is the operator, who may have to accept falling revenues whilst personnel costs rise, triggered by the existing shortage of skilled workers. In the future, it will therefore be even more crucial for each individual operator to position itself clearly to stand its ground in the existing competitive environment”, comments Benjamin Ploppa, Head of Hotels Germany at Christie & Co. He adds: “Even if this development reduces the ability to service the lease in the medium term, yields in the transaction market remain low due to the high availability of liquidity.”
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