Recession Maintains Its Icy Grip on Italy

By Matthew Costin Global Director (Hotels & Hospitality), BDRC Continental | March 19, 2014

While Silvio Berlusconi, three times Italian prime minister, faces prison for fraud, the web of cross-holdings between Italian banks, commerce and industry is unraveling and the economic outlook is bleak. The recession is likely to persist through 2013, with uncertainty whether the gentle recovery in Germany and France will help Italy up also.

Cold comfort indeed for Italian hoteliers.

Hospitality trading conditions are not optimal in Italy's capital, Rome, or its industrial engine room, Milan. Occupancy declined in both cities in 2012 (0.7% for Rome, 2.6% for Milan). 2013 is expected to show Milan holding steady but Rome dropping a further 2.1%. This, believe it or not, is the good news. The rest of the Italian hotel market has been hard hit by declines in the domestic business market as well as domestic leisure.

Italian Hotel Market

Domestic business volumes have fallen by a sharp 12%, from 47 million room nights in 2012 to 41 million in 2013. Domestic leisure volumes have fallen sharply for the second year running, from 63 million to 56 million room nights – down 11%.

The domestic business market, after several years of stability, has fallen. Participation in the domestic business travel market is down over 10% from 2.8 to 2.5 million. The number of frequent business travelers has also dropped, from 0.5 to 0.4 million. With reduced participation and restrictions on discretionary spend, domestic business nights are down more than 12%, from 47 million to 41 million. The greatest proportion of these travelers, 21%, comes from the industrial northern region of Lombardy, home to a sixth of Italy's population and generating a fifth of its GDP.

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