Air transport and connectivity was a key factor in creating higher tourism potential and passenger stays through increasing arrivals, according to a study from Christie & Co.
The report found that growth in the region in 2018 was being driven by Southern and Mediterranean Europe, drawing the interest of investors.
‘European Hotel Investment Trends 2018: Connectivity, hospitality & opportunity’ highlighted Europe’s growth in 2017, despite significant political and socio-economic changes in the region over recent years, with an 8.4% increase in international tourist arrivals.
This trend was set to continue in 2018, with the report showing a 6.8% increase from January to June of this year. Southern and Mediterranean Europe reported a 12.8% increase, driving the growth of the region overall.
The study found that air transport and connectivity was a key factor in creating higher tourism potential and passenger stays through increasing arrivals, as illustrated by Iceland, which has seen a 488% increase in airport connectivity over the past decade and saw the biggest 10-year CAGR in hotel arrivals, with 12.3%. Croatia, Poland, Portugal and Spain also benefitted from increased airport accessibility.
Mature markets such as Italy, Germany, and France had limited connectivity growth due to their capacity-constrained airports. While Amsterdam, London Gatwick, Munich and Copenhagen Airport were managing their capacity constraints, this looked to be a major focus of investment as, across Europe, EUR49bn was being dedicated to increasing airport capacity by 31% by 2028.
Germany maintained the top spot for hotel arrivals in 2017, with year-on-year-growth of 4.2%, ahead of France and Spain. Together the three countries accounted for over half of all arrivals. The highest year-on-year growth was seen in Iceland, the Netherlands, Greece, Portugal, Belgium and Croatia. Both France and Belgium were recovering and performing well following a drop in tourist demand, due to previous security concerns.
Italy had the largest hotel supply with 2.24 million beds, followed by Spain, Germany, France and the UK, while Portugal demonstrated the highest supply increase since 2016 with 7.7%. Overnight-to-bed ratios showed how supply measured against demand, with all countries apart from Portugal and Austria showing increases, and the highest recorded being in Iceland, the Netherlands, Ireland and Spain, showing that there was further opportunity for new supply in these regions.
Anna Friedrich, associate director, Christie & Co, said: “The findings show that the UK is one of Europe’s largest outbound markets and accounts for double-digit overnight shares in Iceland, Spain, Portugal and Greece. This exposes these markets to performance decline should UK demand decrease after Brexit.
“There are plenty of opportunities in the region for opportunistic investors and, as highlighted in the report, connectivity remains a key factor in the viability of these locations. Maintaining connectivity between European markets and the rest of the world, particularly Asia, is vital in driving further growth in the European tourism sector.”
The rising importance of secondary markets for those looking for returns was discussed in a panel debate following the launch of the report in London, with Carine Bonnejean, managing director, hospitality consultancy, Christie & Co, commenting on the growing interest the group had seen from investors outside the mature markets.
The other panellists noted that investors were looking not only to non-traditional locations, but also to alternative forms of assets, on the edge of the hotel sector. Laura Brinkmann, VP, Brookfield Asset Management, commented on the group’s acquisition of SACO last year and its move into serviced apartments, which the company viewed very much as a rising segment.
Brinkmann described the expansion of its Locke product, which had in some cases outperformed its competitors, offering a more design-driven and interesting product than many of the other offerings in the market, which had allowed it to push rate at a time when many felt that performance in Europe could be reaching a peak.
Navneet Bali, chairman, Meininger, told attendees that he thought the company’s hostel hybrid model was capable of expanding further in the cities where it was already present, describing the group’s strategy as “more of the same”. Bali pointed to the concept’s ability to derive greater returns from smaller spaces as best suited to crowded city markets, a view which was echoed by Nick Chadwick, SVP, hotel asset management, Starwood Capital, which invested in the pod hotel concept Yotel last year.
HA Perspective [by Katherine Doggrell]: If you build it, they will come, the study found, although only if they can get to it, as many cities isolated by the UK’s pitiful public transport network will attest, somewhat ruefully.
The role that infrastructure plays in the success of a destination cannot be underestimated at a time when the UK is threatening to make the movement of people that bit harder. With the expansion of Heathrow grinding oh so slowly away in the Brexit background, a laissez-faire attitude towards travel may well prove an error when Istanbul is positioning itself as a hub. The success of Iceland in recent year is due almost entirely to its strategy of making itself a stop-off point for budget flights across the Atlantic (and it didn’t hurt when its economy staggered and made a pint more affordable in Reykjavik, London take note).
The Leave campaign has made a great deal about what wonderful opportunities lie out there for our exports, with the emphasis being very much ‘blessed are the cheesemakers’. It is unlikely that the economy will prosper on cheese alone. If we want to lean on tourism, the nation’s creaking infrastructure must be addressed.