EUROPE The hotel industry in Europe is showing steady signs of growth, although it is yet to recover to pre-downturn levels, according to new data from American Express Business Insights.
In a positive sign for the European economy, there has been significant growth in spending at luxury hotels, growing an average of 9% across all markets in 2010. Spending at upscale and midscale hotels only grew at 3% and 2%, respectively. In the UK, both luxury (10%) and midscale (7%) are seeing strong growth. One likely reason for the growth in the luxury category is the number of high-profile new luxury hotels that have opened in Europe over the past 12 months.
Overall hotel spending in Europe grew 7% in 2010, with a further 4% growth in the first quarter of this year. Growth is being driven by tourists from beyond Europe who are returning to the region, along with increased spending in luxury hotels and a rebound in business travel. Travelers from the Millennial Generation are proving to be particularly resilient, largely defying the downturn and showing a clear appetite for luxury spending.
The Millennial Generation is spending 20% more on lodging today than before the downturn, and in the first three months of this year they have spent 24% more on hotels compared to the same period last year. More than half of young travelers stayed in a luxury or midscale hotel. Their most popular destination choices were the UK, France, and Italy.
The UK hotel sector led spending growth in Europe last year, improving 10%, followed by France (7%) and Germany (4%). None of the markets has returned to pre-downturn levels, although the UK, France and Germany are almost back to 2008 spending levels. While Spain (8%) and Italy (4%) also grew in 2010, they were hit harder by the downturn and have further to go before they recover to 2008 levels.
“Visitors to Europe drove double-digit year-on-year growth in 2010, and business travel grew by 10% across the region over the same period,” says Sujata Bhatia, vice president of American Express Business Insights in Europe and Asia. “Furthermore, we saw spending growth amongst luxury leisure travelers increase by 9% percent across Europe in 2010.
“This strong growth is great news in an environment where consumer confidence remains low and economic growth fragile,” Bhatia says. “This is particularly true in the UK, where international visitors are spending again, making a significant contribution to the UK’s economic recovery. It will be interesting to see how heightened global interest in the UK—with the royal wedding, Queen’s Diamond Jubilee and the 2012 Olympics—impacts the sector.”
Visitors to Europe are an important driver of the recovery; in short, tourists are back. Representing one-third of all leisure travelers, spending by non-European tourists declined more sharply than by European travelers, but their rebound has been impressive. Visitors from outside the region drove double-digit growth in spending across every market in 2010 compared to 2009, taking them back to 2008 absolute spending levels. On average, they spend 88% more per trip than European tourists.
Italy saw the greatest growth from non-Europeans (15%), followed by Spain (14%) and France (13%). The UK and Germany grew at a slightly slower rate of 12%. In comparison, the overall growth in spending by European tourists was only 1% in 2010.
In the first quarter of this year, overall growth in spending by non-European tourists remained strong, at 12%. In the UK it was 9%, a promising sign for the peak summer season. There was no growth in spending by European travelers in the same period.
In 2010 the most popular holiday destinations for Europeans and non-Europeans alike was France, followed by the UK. France overtook the UK to become the most popular holiday destination in 2009.
The importance of business spending to the sector cannot be underestimated. Business travelers currently represent one-third of all travelers across Europe and almost half of travelers in Germany. In 2010, spending by business travelers increased by 10% across Europe, with a further 4% growth in the first quarter of this year. This was largely driven by an increase in the number of travelers, rather than an increase in average spending.
“While not yet back to pre-downturn levels, business spending in hotels dropped off more slowly and rebounded more quickly, showing how vital business travelers are to the hotel industry,” Bhatia says. “We are watching with interest to see if the virtual management strategies adopted in the downturn will have a lasting impact on business travel.”