Hotel Industry Performance In Europe

Most hotel revenue managers are probably tired of hearing about the economic crisis, its negative effects on the economy, and the falling occupancy. But for many, this is just the tip of the iceberg as people cut back on travel. One of the worst affected markets was the United States but its effects have spread throughout the world most notably Europe and Asia. Two cities in Europe show how grim the picture is for the hotel industry.

Vienna’s Hotel Rate Distribution and Sales

The hospitality industry in this city saw their profit decline by almost two-thirds per available room. This has significantly reduced their RevPAR. Other cities that took the brunt include Prague and Amsterdam. Prague saw its profit decline by half while Amsterdam declined by 45.2 percent. The single city that did not experience double-digit reduction was Hamburg.

The situation is particularly concerning in Vienna. Its labor costs now take up to 55.5 percent of its revenue. This incredibly high cost of labor is making it harder for the market to recover. Although the payroll expense traditionally has been high during the first part of the year when hotel sales are at its lowest, having the labor costs comprise of more than half the total revenue is not normal.

How London and Paris is Coping

Both London and Paris experienced almost the same level of decline in terms of occupancy rate. The occupancy rate in London is down to 70 percent while the figure is 69.3 in Paris. In terms of hotel profitability, the figure fell by 21.5 percent in London and 20.6 percent in Paris, France. These developments have forced London hotels to implement new hotel rate strategies. Most hotels have already provided discount for travelers.

Average room rate have now dropped by 8.4 percent in the city while Paris did not cut their rates that drastically. In their quest to improve hotel sales, hotel revenue managers are pulling all the stops. Discounts, customer service, expanded hotel distribution channels, and online presence are all utilized to boosts hotel profitability. Time will tell whether these initiatives are actually effective for the entire hospitality industry. Consumers need to build more confidence on the economy before they spend at the same levels they once did.