OREANDA-NEWS. February 08, 2013. PwC’s annual European Cities Hotel Forecast 2013 expects revenue per available room (RevPAR) growth to slow in 2013 due largely to the prolonged economic downturn, reported the press-centre of PwC.

Nevertheless, some cities, such as St Petersburg, Paris, Moscow and Frankfurt, are expected to demonstrate robust RevPAR growth in 2013, with more modest increases expected in Berlin and Dublin. The report compares the 19 cities in terms of both euros and in local currency, with some slight variations in results.

A double dip recession and the continuing euro crisis had a significant impact on the hotel sector in 2012. Influenced by the weakened economic outlook, certain hotel markets (Amsterdam and Madrid) underperformed our expectations, but some others (Dublin, Moscow and Barcelona), eclipsed predictions.

Moscow saw a strong recovery in occupancy in 2010 but ADR fell 15.4% driving a 5.4% RevPAR decline. Both occupancy and ADR grew in 2011 and as a consequence Moscow saw a strong 7.9% gain in RevPAR. The first nine months of 2012 saw 5.1% occupancy gains and almost 3.5% ADR growth drive a 8.8% RevPAR boost. By the end of 2012, we expect occupancy and ADR growth to continue with RevPAR enjoying another strong year, taking RevPAR to RUB 3940.

Holger Mueller, Head of Real estate practice, PwC Russia, comments:

"The good news is that Russia's 2 capitals are expected take the top space in terms of RevPAR growth in 2013. The bad news is that both still are not able to fully use their potential: St. Petersburg's hotel sector should be able to grow much stronger if a further ease of the visa regime would make it easier for tourists to come. In the case of Moscow there is still a lot of space to expand the Hotel sector - the current pipeline of hotels under construction is rather insignificant for a city of its size."

According to data from STR Global, Moscow has 147 hotels with more than 37,000 rooms and some 415 rooms opened within the last nine months of 2012. Over 50% of the city’s accommodation stock is comprised of 3 star hotels. In September 2012, six hotels with 2,180 rooms were in the pipeline for Moscow. If all the scheduled openings occur as planned, room numbers in Moscow will increase by more than 560 rooms in Q4 2012.

Average European hotel occupancy rates in 2012 showed a small decline for the year to September, notably in Southern European destinations. By contrast, a report from the European Travel Commission shows clear and continued gains in some Eastern European countries. Four cities appear likely to see double digit RevPAR growth in 2012: St Petersburg (14.1%), Dublin (13.9%), Prague (13.1%) and Moscow (12.9%), with almost double digit growth in Berlin (9.6%) and Paris (9.0%).

The forecast in terms of euro currency include: St Petersburg with expected 7.3% RevPAR growth over 2013; followed by Moscow (5.2%) Paris (5.0%) Frankfurt (3.5%), Berlin (3.2%) and Dublin (3.1%). In local currency terms, Paris is the frontrunner with predicted 5.0% RevPAR growth –followed by St Petersburg (4.8%), Edinburgh (4.0%), Frankfurt, Berlin and Dublin.

In total, seven cities are expected to see RevPAR (in euros) decline in 2013; London (-7.9%) is followed by Madrid (-5.8%) Amsterdam (-3.2%), Zurich  (-1.3%), Brussels (-1.2%), Rome (-1.1%) and Geneva (-0.3%).

A myriad of factors have potential to affect the European hotel industry. The eurozone crisis and overall economic instability translates to challenges including lowered consumer confidence and increased competition.  Other issues and trends noted as concerns to hotel industry leaders include:

changing consumer preferences;

the digital revolution – how hotels’ customers choose, compare prices, book and share opinions about their travel experience is evolving rapidly

the impact of online aggregators on price and distribution;

gaining market share in a slow growth market where retaining existing customers is crucial;

competition for BRIC tourists which continues on an upward trajectory.