Europe hotel performance caused some reason for concern during the first quarter of 2023, but momentum points to healthy performance ahead for gateway cities and secondary markets thanks to recovering corporate demand as well as resilient leisure travel.

Solid overall since the last wave of COVID

Despite slow Q1 performance, hotels showed better yield percentage change than other forms of commercial real estate in Europe, such as office, retail and industrial space.

Additionally, when expanding performance out to a 10-month view, top-line and bottom-line metrics trended well in nominal and real (inflation-adjusted) terms.

We of course limited the view to 10 months to remove the impact of the last major wave of COVID in early 2022.

May 2022-March 2023

As winter has passed, performance is once again trending upward with occupancy inching closer to 2019 comparables and ADR driving RevPAR gains as high as +28.6% for the opening of May.

Looking ahead

While the global economic climate presents plenty of reason for concern, Europe’s hotel industry has plenty of reasons to be optimistic.

Supply growth isn’t much of a concern. The pandemic closed roughly 4.5% of supply, which was offset by 4% growth in new openings. Future growth is only around 1%. Brand conversions have tripled in recent years.

Recessionary risks should be offset by tailwinds from recovering business and group demand as well as resilient leisure travel. Occupancy on the books is even better than last year.

Rate growth remains real. ADR is increasing at levels higher than inflation.

Read the full report with interactive charts here