Helsinki hotel market among Europe’s quickest recoveries

HELSINKI Hotels in Finland’s capital region posted a 10.7% rise in RevPAR in January year over year, following an increase in demand during the second half of 2010 despite stalled ADR growth, according to a new market study from Christie + Co and STR Global.

Helsinki is the key tourist destination in Finland, with approximately 1.8 million visitor arrivals in 2010. The city attracts a healthy mix of business and leisure visitors and benefits from excellent infrastructure and air transport links.

The Helsinki hotel market is largely fueled by business demand, which decreased significantly during the downturn. Nevertheless, demand for hotel accommodation in Helsinki recovered faster than economists and industry experts anticipated. The recovery has been more rapid than that of many other Europe cities.

Helsinki hotels recorded an overall decrease in RevPAR performance of 17% in 2009, and after a difficult first month in 2010, hotel demand showed quite promising growth from February onwards—a positive trend in line with the increase in passenger arrivals at Helsinki Airport. Year-end 2010 RevPAR figures for Helsinki showed a 5% increase year over year, driven by a strong recovery in domestic business and leisure demand.

According to Statistics Finland, the hotel market in Helsinki consisted of 53 hotels and 8,300 guestrooms in 2010. A sign of the resilience of the hotel market was the strong occupancy performance recorded last year, despite the increase in supply. New hotel openings in 2010 included the 152-key midscale Cumulus Hakaniemi, the 58-key lifestyle Hotel Fabian and the 82-key limited-service Omenahotelli.

A number of sites in the Helsinki area are earmarked for hotel development, but a lack of domestic funding means the short-term hotel pipeline remains limited. As most of the existing hotels in the area operate in the midscale segment, significant opportunities at both ends of the quality spectrum remain unexplored. In late 2010 and early this year, interest from international hotel operators towards the limited service market in Helsinki has been notable. A couple of excellent locations in the city center are also being considered for a full-service property, which could be operated under an international flag.

Construction on the long-awaited Marriott West End project, near Nokia’s headquarters, is expected to start later this year. The 275-key hotel will be the first Marriott Hotels & Resorts property in Finland.