Hotels in Germany have shown one of the fastest recovery rates compared with those in other European countries and have proved to be the star performers in terms of RevPAR growth, according to an extensive new report on the German hotel sector.
The report, After the Storm - Germany in the Spotlight, is published today ahead of next week's Expo Real, one of Europe's largest commercial property and investment fairs being held in Munich [4-6 October 2011].
The key reason why German hotel markets have shown such a dramatic recovery is the strong growth in the country's manufacturing industry and demand for exports. This has made Germany the engine for economic growth in Europe and boosted domestic demand for hotel accommodation. Hotel trading in most of Germany's cities is now back to, or exceeding, pre-crisis 2008 RevPAR levels.
The sector has also been boosted by the German VAT decrease for overnight stays in hotels from 19% to 7%. This has enabled hotels to raise funds for refurbishment making them more competitive as consumer demand returns.
Of all the German cities analysed report author Arlett Oehmichen, associate director at HVS London, singled out Munich having shown the strongest recovery.
"Munich hit a home run in terms of RevPAR recovery. In 2010 Munich's RevPAR was 9.5% higher than it was in 2008, reaching €85.41, indicating that the city has truly recovered," she said. "This recovery was due to the return of large conventions and fairs to the city in 2010 as well as increased leisure visitors lured to the 200th Octoberfest."
However, the report highlights the fact that Germany's secondary cities are recovering less quickly than primary ones. Düsseldorf and Stuttgart, where the hotel market is closely tied to the trade fair calendar and therefore more prone to cycles, still lagged behind 2008 at the end of 2010.
"But trading this year has been strong for Düsseldorf. Figures for the year-to-June 2011 show a RevPAR increase of 25.6% on 2010. Stuttgart and Hanover, which rely heavily on business demand, have also recorded strong RevPAR growth in 2011, of 17.9% and 16.9%, respectively. All the markets analysed showed RevPAR growth this year on 2010 levels, with the exception of Berlin (-0.6%) and Leipzig (-7.5%)," added Oehmichen.
Germany has also remained one of the more active markets in Europe in terms of hotel transactions with investors attracted by the country's strong recovery compared to other struggling economies and hotel markets.
Fifteen single-asset transactions have taken place in the first half of 2011, including the sale of the Steigenberger Airport Hotel Berlin for €59 million (€183,000 per room), the Moevenpick Hotel Stuttgart and the Arosa Grand Spa Hotel in Sylt.
Between 2008 to 2011, Hamburg registered the highest sales volume, closely followed by Berlin, Munich and Frankfurt.
"International investors are also interested in trophy assets, a trend that is seen in the rest of Europe. A portfolio of five luxury hotels came to the market recently for around €380 million, including the Kempinski hotels in Dresden, Berlin and Hamburg. Overall, the fundamentals of the German hotel sector are very strong," concluded Arlett Oehmichen.
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