The World Cup and the German Hotel Industry

An Initial Review

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. October 14, 2008

PARIS, France, July 6, 2006

--During match days, hoteliers in host cities are posting double rates and fully booked hotels

--Berlin and Frankfurt could be the biggest winners in direct extra revenue

--Hope prevails for the deferment of business travel activity and a positive lasting effect for German tourism

Since June 9 the Football World Cup has been in full swing across Germany. Last year's highly optimistic forecasts for the hotel industry fuelled hoteliers' hopes for extra revenue. With many FIFA-blocked rooms being reopened, many faced the Cup with damped expectations. The direct effects of the Cup are, as a matter of course, largely being shared between the twelve host cities. Time for a closer look.

Berlin

The capital's hoteliers were hit hard by the reopening of 5,000 of 8,000 blocked rooms by FIFA and two weeks after kick off, hotel rooms were still available for last-minute reservations at considerably low prices. Despite the progressive rise in supply, hotel occupancy in the German capital is finally increasing. In May, the occupancy rate had increased by approximately ten points, reaching 82% at an ADR that rose by 3.9% to 94.5 euros. Furthermore, many favourably located hotels were fully booked for two or three days around matches, occasionally at over 200% of the normal rate. 700,000 additional guests are expected in the capital and hosting the final stages of the Cup will surely boost RevPAR.

Frankfurt

In Frankfurt, home to Germany's most important and largest international airport, its central location in the heart of the country, popular matches and some of the biggest fairs during the World Cup combine to make the city a potential winner. In addition to brilliant results on match days with RevPAR gains of over 250%, several hotels of all categories reported an exceptional increase in rates alongside a double-figure rise in occupancy for most of the period of the Cup.

Munich

With Munich boasting excellent results for May 2006 (RevPAR of 80 euros) and in comparison with excellent results in June 2005, there is not a great deal of room for improvement. At a moderately elevated price level, already one of the highest in Germany, increases in occupancy appear to be limited to match days and hotels in the heart of the city, where hoteliers expect an OR in the region of 85%.

Hamburg

Charming Hamburg is one of the few cities that reports noteworthy last-minute bookings and walk ins of individual clients as well as small groups since the beginning of the World Cup. With a rising ADR and an OR that might even surpass 85% in June, last year's results could be considerably surpassed.

Dortmund, Cologne, Gelsenkirchen

Ideally located between three cities that play host to sixteen matches, it is D"usseldorf, with its well established infrastructures and busy airport, that is set to be one of the greatest beneficiaries of the Cup. The city also boasted a fair that has the potential to even out the days with no matches. Rates in D"usseldorf were lower than in most host cities, which were rewarded plenty of pre-bookings. Cologne appears to be faring well too with RevPAR gains of over 200% on match days. In Dortmund huge World Cup camps with up to 3,000 sleeping berths offered at rates of less than thirty euros appear to be hindering the business of established budget hotels.

Stuttgart

In Stuttgart, one of Germany's favourite business and convention venues, the usual business clientele appears to have deserted the city. Nevertheless, with well booked hotels in the city centre and elevated rates of up to 250% on match days.

Summary

Concerning the overall effect of the World Cup on the industry, the excellent revenue gains of over 200% on match days in host cities, will at the end surely boost the country's global RevPAR for June and July.

With Germany's excellent infrastructures and airlines serving both major European airports and German cities with increased capacity and frequency, spectators may return home or to their base soon after a match. Therefore long-term stays are rare and centrally located cities like Frankfurt or D"usseldorf are benefiting more.

The good weather and atmosphere are drawing spontaneous visitors from neighbouring countries. These largely young spectators stay in budget hotels but also hostels and campsites.

With the almost complete absence of conferences and trade fairs, the Cup is clearly having a negative impact on the business segment, which traditionally takes the lion's share of revenue in German cities.

Although two cities were set to gain the biggest share of direct revenue - Munich, headquarters of the international press, and Berlin, which hosts the final stages - it is still unclear who will take home the trophy. For Germany as a whole, it is also too soon to project revenue gains accurately.

Prevailing in the industry is much hope for positive mid- and long-term effects of the pervasive positive image of Germany as a tourist destination as well as a significant deferment of business travel activity into the second half of the year and 2007.

MKG is the recognised leader in consulting services for the hotel, tourism and restaurant industry and has the largest hotel performance database in the world outside the United States (www.hotelcompset.com). In Germany, MKG boasts the largest hotel database with close to 800 participating hotels, covering all hotel segments and key markets. 9 of the leading 10 and 17 of the leading 20 chains participate in hotelcompset.