Munich Takes Lead But Moscow Remains the City to Beat in Europe

UK Chain Hotels Market Review

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. October 14, 2008

JUNE 7, 2007. Hotels in Munich had the strongest sales performance out of 10 leading European cities, according to the monthly HotStats survey by TRI Hospitality Consulting.

The result was thanks to a huge 77.6 per cent leap in revenue per available room during the month of April which meant that for the first four months revpar in the Bavarian city was up 27.2 per cent, just ahead of the usual star performer Moscow which had a 26.6 per cent rise for the first four months.

'Some German cities are hugely affected by the occurrence of trade fairs and this means their performances can fluctuate wildly month-to-month. We expect the full-year numbers to be less dramatic,' said Jonathan Langston, TRI Hospitality Consulting's managing director.

During April Munich hosted Bauma, a triennial trade show that in 2007 attracted more than 500,000 visitors. This will still boost Munich's full-year figures but much less so than the impact over just the first four months.

By contrast, Moscow has been consistently putting in strong performances in revpar terms. In April, revpar was up 41.0 per cent thanks to a 28.1 per cent hike in rate and a 6.7 percentage point increase in occupancy. And over the first four months, Moscow improved revpar by 26.6 per cent thanks to rate up 24.6 per cent and occupancy ahead by 1.0 percentage points. 'The rate rise in Moscow remains ahead of Munich for the first four months and we expect it to clearly pull away from all of the other cities in the survey during the rest of the year,' said Langston.

Prague and Hamburg start poorly

Prague and Hamburg have had the worst start to the year so far, and are the only cities in the survey showing negative revpar growth in the first four months. Prague was the worst with revpar dropping 7.6 per cent while Hamburg was down 4.7 per cent.

Two other Central and East European cities performed poorly, Budapest and Vienna, showing revpar growth of just 0.6 per cent and 1.8 per cent respectively. The remaining other six cities in the survey put in a revpar increase that was at least double digit. 'Eastern Europe has historically struggled more during the winter months, particularly in major tourist destinations such as Prague. The key period will be over the coming summer months,' said Langston.

Wage costs rise in Budapest

A major advantage hoteliers in Eastern Europe have over those in the West has been lower wage costs but there are signs that this may be changing. In Budapest, payroll as a percentage of turnover showed the highest rise with a 4.6 percentage point increase to hit 37.2 per cent. Only Paris and Vienna had a higher payroll percentage. The best performance in terms of payroll was again Moscow, where payroll was just 21.8 per cent of turnover. Next best was London with a payroll percentage of 27.0.

'The trend in payroll percentage typically follows the opposite direction set by revpar. But Eastern European hoteliers need quickly to get to grips with the increase or profitability will suffer,' said Langston.