The European hotel market is "going into negative" in revpar terms according to Rezidor Hotel Group, the listed operator.
Falling occupancy and slowing room rate growth is et to take overall revpar negative in the final quarter.
CEO Kurt Ritter said a cost reduction plan is being implemented across the company comprising mostly a reduction in fixed costs and improved purchasing agreements. The plan is expected to shave Eu20m from costs with the full effects evident from the second half of 2009.
The company outlined its sensitivity to revpar downturn, stating that a Eu1 change in revpar wipes between Eu5m and Eu6m from EBITDA. Break even for the company is when average revpar is at Eu55. It pointed out that there is a 40% buffer before it starts losing money as revpar in 2007 was Eu77.
It stressed how it had a strategy of "hedging for turbulence". This comprised shifting its business model towards fees, making more infrequent use of contracts with financial commitments and picking projects with faster ramp-ups and on conversion opportunities.
In addition, the strengthened foothold in emerging markets which now account for 40% of the portfolio was seen as offering insulation. As was the multi-brand portfolio which now encompasses 220 Radisson SAS and 120 Park Inns.
While the credit crunch is expected to delay room openings and the economic turmoil has seen profit targets cut across the sector, there are likely to be growth opportunities thanks to the softer market.
In particular, it was anticipated that there will be a "surge in distressed properties seeking buyers or international branding".
All of next year's pipeline is under construction and overall, of the 23,000 rooms under development, about 60% is under construction.
This year has been a record year for signings for the company and it now has Eu4bn worth of hotels in its pipeline. The big growth has been in the Middle East and Africa, accounting for 33% of rooms in development and Eastern Europe with 31% of the total. Just 9% of the rooms in development are in Rezidor's Nordic heartland.
For the third quarter, revpar on a like-for-like basis was down by 0.4% to Eu81.40. Occupancy fell more dramatically, hitting 71.4% from 76.2%.
EBITDA was Eu20.0m down from Eu25.9m and profit after tax was also down, hitting EU10.1m from Eu15.1m.