Italy has been known to have a fragmented hotel industry with domestic families dominating hotel ownership, but that's likely to change in the next decade.
Claudia Bisignani, head of hotels and hospitality for Italy at business advisory JLL, said the Italian hotel industry is still highly independent and non-brand-affiliated, but now the market is turning to a new chapter.
Call it a renaissance, even.
In an interview with Hotel News Now, Bisignani said that more international operators are looking to enter the Italian market.
“There are several factors involved," she said. “Family businesses are looking to exit, with second and third generations now no longer interested [in hotel ownership]. Also, as more newcomers enter the market, that’s changing the competition, which means it is more difficult for locals.
“Many owners see now is the perfect time to sell, and not with distress,” she added.
Vera Roselli, account manager for Italy at STR, CoStar’s hospitality analytics division, said she sees multiple reasons behind Italy’s current success and added that these trends started some time ago, even before the COVID-19 pandemic.
Average daily rate “keeps on growing, even if occupancy is almost stalled now. Demand has grown. Italy still attracts international tourism, being at the first place in the UNESCO Heritage list and offering a variety of experiences and landscapes. Italy is rich, in that sense,” she said.
Roselli added American tourists returned in waves to Italy over the summer.
Luxury in A Luscious Land
Bisignani said top-line revenue metrics show hotels in Italy are doing very well in all key cities and resort destinations, with performance well above that of 2019.
Just as international tourism flows have expanded, with ADRs soaring in both 2022 and 2023, so has the volume of overseas investors keen to join the market’s renaissance, with great focus on added-value opportunities and rebranding options, she said.
Italy is on the radar of all active investors considering high potential and market fundamentals.
CoStar data shows Italy’s hotel average daily rate was €271.84 ($284.62) in June and €263.89 in July. By contrast, Spain's hotel ADR was €156.24 in June and €168.64 in July, or 43% and 36% of Italy's hotel ADR in the same months.
Bisignani said the Italian market is showing great momentum, which will result in hotel supply being different both in the short term and the medium term.
“There will be a mix. There will be rebranding and conversions from offices, and stimulating investors’ appetite are lots of value-added opportunities,” she said.
Among Italy's key markets, its capital Rome is undergoing the most profound hotel shakeup, and global brands are moving in, Bisignani said.
“I would say Rome is having a total market repositioning, certainly in the luxury segments. … It is welcoming entrants such as Six Senses, Edition, W Hotels, Bulgari, Rosewood, Four Seasons and Mandarin Oriental,” Bisignani said.
The increase in brand presence has driven a large increase in Rome's hotel ADR.
“For first eight months in 2023, Rome saw a 28% year-on-year growth in the 5-star segment to €840,” she said, adding that Rome trails Milan, which for the same period posted ADR of €910.
As summer concluded, Rome's hotel occupancy reached 71.9% in August. During the month, the city's ADR was €228.56, up 22% from a year ago. RevPAR reached €164.42, a 40.9% year-over-year increase. Meanwhile, in Milan, August hotel occupancy was 70.3%, ADR increased 18.3% year over year to €199.05 and RevPAR rose 43.4% to €139.88.
There also has been an increase in guest and investor interest in Italy’s secondary cities and regions such as Bologna, Naples, Lecce and Verona, as well as leisure destinations such as Lake Como, Lake Garda, the Dolomites, Sardinia and Sicily.
Roselli agreed that new luxury hotels are spearheading the charge.
“This is attracting wealthy tourists, and each hotel is different. … Architects and designers are searching for Italian authenticity, the result of being in such a ‘fragmented’ market, with each region having its culture, food, [traditions], architecture and history, and because it has fewer branded hotels than in other countries,” Roselli said.
The growth in hotel ADR might not be a surprise in cities such as Milan and Venice, but it has been for hotels in secondary markets, she said. She also acknowledged that “some family-owned/-run hotels are ‘giving up’ after COVID-19, which caused so much monetary loss” and a generational change in that younger people are now not willing to run the family company.
Roselli said Italy's domestic brands have not disappeared and also are performing well, especially domestic white-label operators that are playing a key role in filling in the gaps and providing lease agreements and franchises.
“I would not say business demand has gone. Milan, in terms of [key performance indicators] is back in the running. It is just that leisure has grown significantly more,” she added.
Venice will soon introduce a €5 levy to daily visitors, but Bisignani said this will not be a constraint, since visitors were not deterred when Rome enacted a similar tax.
“The main challenges, as it is for other markets, are macroeconomic ones, but the hotel industry here is sound. There are now more good quality products in the market, and trading results are supporting this scenario,” he said.
If one city has slipped, it might be Naples, Bisignani said.
“There are new brands there. Investors acknowledge the industry is reshaping. There are more advisers and an increase in overall sophistication,” she added.