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16 March 2017

Hotel Market Germany: Top Performance, new Brands

Christie & Co analysed the German hotel market, with a special focus on the top six of city destinations. The market as a whole has developed very positively.

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At this year’s International Hotel Investment Forum in Berlin, Christie & Co published an overview of the German hotel market, analysing six key cities – Berlin, Munich, Frankfurt/Main, Hamburg, Cologne and Dusseldorf. The hotel property advisers based some of their findings on performance data provided by STR.
The report reveals that while performance of the individual markets may differ, the German hotel industry as a whole achieved a new record high in regards to overnight stays and RevPAR increased by 3.4% in excess of the overall 1.9% GDP growth.

Germany’s capital Berlin is known for its sharp hotel supply growth, but despite its full pipeline is still going strong. The number of hotels and B&Bs has grown by 4.5% and the number of bedrooms by 14.3% in total since 2011, while the number of arrivals and overnight stays picked up by 24.6% and 35.8% respectively. Therefore, both occupancy and ADR recorded an upward trend, resulting in a RevPAR of €74. This may still be the lowest RevPAR compared to the other cities under review; however, Berlin registers the second largest occupancy. What is more, 2016 figures revealed further RevPAR growth. While more than 30 hotel projects are expected to add about 8,300 bedrooms to local supply in the future, a number of demand generating initiatives such as the addition of a new airport are set to fuel performance in going forward.

Munich’s hotel market attracts both business and leisure travellers and has recorded positive performance growth over the past five years. In 2016, the Bavarian capital saw a decline in occupancy for the first time since 2009 and RevPAR dropped slightly as a result. With more than 45 hotel projects and expansion plans in the pipeline which are set to add another 8,100 bedrooms to the market, supply growth might further impact performance. That said, Munich was able to keep its position as the city with the highest ADR (€134) and the highest RevPAR (€102) and will therefore continue to be considered as one of Germany’s most attractive hotel markets.

Being Germany’s financial capital, it comes as no surprise that Frankfurt/Main’s hotel market is dominated by business travellers, over 70% of visitors belong to the business and MICE segment. While all KPIs have developed well over the past five years, 2016 saw stable occupancy rates but decreasing room rates which had a negative impact on RevPAR. This trend can be put down to the massive increase in supply experienced by Frankfurt, covering the full range from 1- to 5-star hotels. While there are 25 hotel projects with about 6,100 bedrooms in the pipeline, the major expansion of the city’s trade fair grounds as well as the possibility of financial experts moving from London to Frankfurt after Brexit is expected to enhance demand growth going forward.

Hamburg’s hotel market turned out to be one of Germany’s most dynamic over the past five years and is expected to continue its success story, despite its full pipeline with 50 hotel projects planned, adding 9,800 bedrooms to local supply. Being a centre of commerce and a popular city destination, the share of leisure and business guests is even, and both arrivals and overnight stays recorded high growth levels since 2011. 2016 figures confirmed Hamburg is Germany’s most sought after city destination, recording an occupancy rate of 80% – the highest in Germany – and a strong increase in ADR. The planned expansion of the Congress Center Hamburg and the city’s new urban district HafenCity is expected to enhance future growth.

While Cologne’s hotel market set its record in 2015, it registered a marginal decrease in RevPAR due to lower occupancy rates in 2016. This might be explained by a certain image loss due to the incidents on New Year’s Eve 2015/2016 and a less favourable trade fair calendar, which the metropolis on the Rhine is quite dependant on. In fact, despite the city’s strong tourism market, over 70% of demand is generated by business guests. Given the trade shows planned for 2017, better performance can be expected for this year as biennial events mean uneven years are traditionally stronger than even years.

Dusseldorf’s hotel market set a new record in 2016, recording the highest KPI growth levels of all cities under review, resulting in a RevPAR increase of 17.0% year-on-year. As in the case of Cologne, over 70% of all of Dusseldorf’s overnight stays can be related to business tourism. This explains last year’s record, as North-Rhine-Westphalia’s capital hosted major trade fairs such as drupa and K. Due to that volatility, a drop in KPIs is expected for 2017.

According to Christie & Co, the positive fundamentals of the German market have attracted many international hotel groups, such as New Century, Premier Inn, Moxy, Max Brown, Toyoko Inn, Hyatt House and Guldsmeden. However, not only did new chains enter the market, existing ones also started adding new brands to their portfolios which correspond to the needs of Generations Y and Z. Examples include Urban Loft Accommodations, JO&JOE, Ninety Nine Hotels, me and all, Soulmade, MOOONS, NYX, LYF, H.Hostels, Hyperion and Loginn by Achat. Furthermore, the importance of soft brands such as Tapestry by Hilton and The Unbound Collection by Hyatt is growing.

Kay Constanze Strobl, Director and Head of Advisory & Valuation Services at Christie & Co in Germany, says: “We have been reviewing the German key markets for many years now and it becomes apparent that despite the global economic and political turbulence, they continue to perform well. This provides a reliable basis for operators and investors alike.”

Lukas Hochedlinger, Managing Director Germany, Austria & CEE at Christie & Co, adds: “The proof of the attractiveness of the German market can be found in the fact that recently many German players are popular candidates for acquisition from international companies looking to expand in Germany. Examples include AccorHotel’s acquisition of a 30% stake in 25hours, Rezidor’s purchase of a 49% stake in Prizeotel, Centro Hotel Group’s takeover of Günnewig Hotels, TPG’s acqusition of A&O Hotels and Hostels, Terra Firma’s buy of Welcome Hotels and Novum’s purchase of sleepNsmile Hotels.”