Hotels across Europe generally have struggled more than those in other regions, particularly the Americas, to recover to pre-pandemic performance levels due to restrictions on travel that lingered for much of 2022 and muted inbound international tourism.
But the latest quarterly results from Europe's three largest publicly listed hotel firms — Accor, IHG Hotels & Resorts and Whitbread PLC, owner of the Premier Inn brand — show performance very near to 2019 levels, and the CEOs of each company have expressed optimism that the upward trend will continue in 2023.
One factor expected to bring American tourists back to Europe is a discount on the Euro compared to the U.S. dollar. European hoteliers also hope for the ease or elimination of restrictions on Chinese tourism in 2023, which would be a big boon for the industry.
Europe's hotel rooms are also expected to benefit from higher demand from business travelers.
Results for IHG and Accor have been skewed to some extent due to notable exposure in the Americas, where the recovery has been most prominent.
Whitbread, though, has essentially two markets — the United Kingdom and, increasingly, Germany, which was one of the last European countries to emerge from tourism lockdowns.
IHG’s Paul Edgecliffe-Johnson, chief financial officer and head of group strategy, said during a conference call with analysts that “clearly leisure has been an important factor in our numbers … but we have seen recovery across all the week. Revenue per available room has become flat across Monday through Wednesday, and these numbers give us confidence that there is more recovery to come.”
IHG's RevPAR in its Europe, Middle East, Africa and Asia region was down 0.1% in the third quarter versus 2019 levels, but average daily rate moved up 12%.
Edgecliffe-Johnson said IHG expects more growth in upcoming quarters in business and group demand, “which are not back to 2019 levels … and more growth to come from China and parts of Europe, Middle East and Africa.”
As for Accor, executives with the French company told analysts that Accor's portfolio-wide RevPAR surpassed 2019 levels for the second consecutive quarter.
Revenue from group business reached 1.1 billion euros ($1.1 billion), an 83% improvement over the third quarter of 2021 and 9% above the same quarter in 2019, said chief financial officer and deputy CEO Jean-Jacques Morin.
Morin said Accor's hotels in France posted RevPAR 11% higher than in the third quarter of 2019. Performance in Paris no longer lagged that of hotels in regional France, he added.
“The business profile of Accor is today more resilient than ever. … In September and October, we did confirm the return of corporate bookings in meetings, incentives, conventions and expositions,” he said.
Alison Brittain, who will step down in January as CEO of Whitbread, said the firm is getting more share of wallet and occupancy against its domestic U.K. competitors, namely Travelodge.
Brittain's replacement as CEO will be Dominic Paul, current CEO of U.K. and Ireland at Domino’s Pizza Group, and former CEO of Whitbread division Costa Coffee.
Total U.K. accommodation sales in Whitbread's latest results were 31% ahead of full-year 2020 numbers. Whitbread’s calendar is structured so that performance for full-year 2019 is written as full-year 2020, and U.K. like-for-like accommodation sales are 21.3% ahead of 2019.
Performance in Germany, Whitbread's second largest market for its Premier Inn brand, is healthy, too, and “underlines our long-term goal of realizing between 10% and 14% return on capital,” Brittain said.
She added hotel RevPAR in Whitbread's German portfolio is 58 euros.
Recent Developments
All three companies are adding to and fine-tuning their portfolios and loyalty platforms.
In November, IHG signed a deal with Mallorca, Spain-based Iberostar Hotels & Resorts to add approximately 70 hotels and 24,300 rooms to its distribution platform.
IHG said Iberostar is effectively its 18th brand, even though no ownership changes are part of the deal.
Accor has finished restructuring its brand offerings into two distinct pillars, with legacy brands in one and lifestyle brands in the other. Accor President and CEO and Sébastien Bazin has said the move will strengthen the hotel group.
“Nine years ago, we had 10 [brands], almost all European. I reshuffled something super-complex to manage. It might be a stronger company, but it is complex, and you must share responsibility, empower staff," Bazin said.
“The management of individual brands was fine, but when we put them together, it is three times as better. Yes, there will be mistakes, but that is fine. They will be the same mistakes I would have made,” he added.
Pulsating Pipeline
All three companies are active in Europe's hotel development pipeline.
According to STR, CoStar’s hotel analytics firm, the U.K. leads all other countries in Europe in terms of hotels in the pipeline, with approximately 125,000 rooms in development. The next closest market, Germany, trails by 35,000 to 40,000 rooms. Spain has the third-largest hotel pipeline, with approximately 40,000 rooms.
In terms of individual capitals and principal city markets, the U.K. leads the way, with London having approximately 30,000 rooms in the pipeline.
Dublin comes in second with approximately 12,500 rooms, followed by Hamburg, Istanbul and Berlin.
In the top 15 markets, there are four U.K. cities represented in addition to London — Glasgow, Manchester, Edinburgh and Liverpool in the seventh, 10th, 12th and 14th spots, respectively.