Acceleration of the recovery of the European hotel industry in the first half of 2006

A 0.9 point rise in occupancy and 3.3% increase in average daily rates in the first half of 2006, confirmed the positive trend for the European hotel industry. During the first six months of 2006, RevPAR (revenue per available room) increased by 4.7%.

These results point out the acceleration in the recovery in the second third of 2006, after a 3.2% rise in RevPAR during the first three months and 2005 concluding with RevPAR gains of 1.6%. The acceleration is particularly significant in June (+7.9% in RevPAR).

An upswing in demand - significant in the 4 star category

In particular the 4 star category enjoyed the first half of 2006: occupancy rates rebounded strongly (+1.8 points) and RevPAR gained 5.4%. The numerous international clients coming to Europe are set to continue the category’s upturn.

Occupancy rates in the other categories remained largely stable but, in comparison to the 4 star category, increases in average daily rates were more elevated which resulted in RevPAR gains between 3.6% (3 star) and 4.9% (1 star).

The confirmed recovery of the major European countries

Thanks to the Football World Cup, Germany was blessed with an outstanding June. Overall occupancy rates were stable but increases in average daily rates boosted RevPAR increases to 34.5% in June. Host cities boasted outstanding performances. While Dortmund stole the show (almost +150% in RevPAR for June), many other German cities registered excellent results – In Berlin, Frankfurt and Hamburg RevPAR rose by more than 30% in June.

The good performance during the entire Cup but also in the months before the Cup leave Germany with an improvement of revenue per available room of 10.3% for the first half of 2006. In accordance with the projections of MKG Consulting, the first half of 2006 held its promise, succeeding the 2005 RevPAR gain of 1.5%.

Likewise, in France, the first half of 2006 confirms an acceleration of the recovery (+4.4% in RevPAR for the first six months). The 4* category registered the strongest improvements (+6.4 in RevPAR), borne by a significant rebound in occupancy (+3.4 points). Long-haul clients were more numerous than last year and, in particular June, concluded with excellent results, close to last year’s, that were already exceptional due to the Air Show in Bourget.

After a three years downward trend, Spain finally rebounds. Occupany rates are stable (+0.2 point) and the average daily rates are up 5.4% whit a 5.6% increase in RevPAR for the first half of the year. The Spanish hotel industry benefits from the country’s GDP growth, superior to the average European. Overcapacity, a problem that strongly penalized the Iberian hotel industry over the last years, is now readjusting in many locations.

The UK boasts a rise in revenue per available room of 4.6% for the first half of 2006. This rise follows the 4.1% growth of 2005.

An end of the year which should confirm these great results

In these four big countries, as well as in Europe as a whole, the favourable trend should continue throughout the second half of the year.

After disappointing summer seasons in 2003 and 2004, France ties up with the growth of summer 2005. Furthermore la rentree should be in favour for the Parisian market which benefits, like every second year, of the Paris Motor Show in October. A deferment of business travel activity into the second half of the year can be expected in Germany: numerous events and meetings were postponed because of the Football World Cup held in June and July. Spain shall continue its path and can boast its first increases in yearly RevPAR since 2002. In the UK, despite a slow down in economic growth since 2005, the good performances of the hotel industry should last into the second half of the year.

	0R first half 2006	Var. OR (pts)	ADR first half 2006	Evol. ADR %	Rev PAR first half 2006	Var. RevPAR %
0*	69.5%	-0.9	32.3	5.7%	22.5	4.3%
1*	69.7%	-0.4	40.2	5.5%	28.0	4.9%
2*	69.5%	0.2	67.6	4.2%	47.0	4.5%
3*	63.8%	0.5	86.7	2.8%	55.3	3.6%
4*	66.9%	1.8	126.4	2.6%	84.6	5.4%
Overall	66.4%	0.9	96.3	3.3%	64.0	4.7%

Source : MKG Consulting Database – official supplier to hotel chains – July 2006
Average daily rates and RevPAR are expressed in euros inclusive of tax