Germany was leading Europe in terms of hotel construction before the pandemic, which could prove “interesting” to watch in the coming months, said STR.
The comments were made as the group described levels of occupancy in Europe as “white wine level” - 11%.
Christian Strieder, country manager DACH, STR, said: “In Germany [before the crisis] we had strong demand, but also strong growth on the supply side. Before the crisis, the country was leading construction in Europe, up 7.7% on the year. Most likely those will come to the market, so it will be interesting to see what happens in the coming months.”
Looking at current performance, he said: “The smaller cities, like Hannover and Leipzig have the highest occupancy levels, at 15% to 20%, where there is more domestic demand, which is something to watch as the recovery comes.
“German demand is quite domestic, with a share of international visitors at 18%, with the top three origin countries Netherlands, Switzerland and US. The country has seen almost 10 years of profitable growth, the rebound after the global financial crisis was very strong and let’s hope that the rebound will be very strong too. The rebound was also very profitable, outperforming European levels.
“Politicians are keen to open hotels in the region, but there have been discussions around occupancy, hotels might only be allowed 50% occupancy, or they have to close rooms between guests. That will have an impact on profitability.”
In Switzerland, Strieder reported that, echoing what had been seen in China, midscale and economy hotels had performed best, with 22% and 16% occupancy in March and April, respectively.
Looking at wider Europe, Robin Rossmann, managing director, STR, said: “There’s no doubt that things are bad and have never been as bad for hotels, but, looking at oil prices, we are at least not as yet paying guests to stay in our hotels.”
As at 30 April, 76% of hotels were closed in Europe, against 17% in North America. Absolute occupancy in April for open hotels 11% in Europe - “a white wine level of occupancy” - and 39% in North America.
Rossmann said: “We hit the bottom in April. Hotels have costs and unless you are achieving occupancy of 30%-plus you will be losing money at a GOP level. So it’s likely that hotels will remain closed unless they can anticipate those levels.
“There might be some green shoots in Madrid and UK and Ireland [when looking at hotels which had been able to remain open], but when including all hotels, there is no occupancy over 6%. There is some business on the books from June onwards, but pickup is negative, so it is too soon to say there are green shoots, because there is still uncertainty and a lack of clarity when the lockdown will be phased out.
“When it does come, it’s going to be like Heinz Ketchup coming out of a bottle - a drip drip drip and then you get five times more than you had expected. However, much demand relies on air travel and much of that is looking difficult in the short term. Even those airline which were not in trouble before the virus are cutting capacity. Most of the airlines don’t expect to see 2019 levels until 2022.”
Returning to China, Rossmann reported that occupancy in China had continued to recover, climbing 10% over the weekend of 1 May to 3 May. This, he said, indicated that “when people have the chance to stay somewhere else will they? Hell yes. Demand is there as long as we are able to travel again.”
Insight: As hotels wait to see what the opening strategies are going to look like, the speculation grows as to how they can also be profitable. And, even more pertinently, how people will get there when even Warren Buffet doesn’t like airlines any more.
Take out ‘planes and you have trains and automobiles, if you’re a fan of John Hughes films from the 1980s - and get to it if this is news to you - so for those hotel development teams out there, it’s time to get out a map and start plotting road trips. As Rossmann pointed out, not all countries rely on air travel to the same extent. France, Spain, Italy and Turkey have more reliance on air travel, but there are plenty of domestic markets which are less inhabited, but full of promise. After all, before All This, weren’t we being told to tread the less-beaten track, if only to have something for Instagram?
Because, as John Candy says in the film: “Six bucks and my right nut says we're not landing in Chicago”.