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Hotel Report

In Focus Five stars on Mayfair or no frills next door?

Edition April 2015

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Fairmas Gesellschaft für Marktanalysen mbH | Sachsendamm 6 | 10829 Berlin | www.fairmas.com Solutions Dot WG GmbH | Kranzerstraße 6-7 | 14199 Berlin | www.solutionsdotwg.com© 2014 Fairmas GmbH/Solutions Dot WG GmbH

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FairmasHotel Reportin cooperation with SolutionsDotWG

Index

Dear readers, 3

March 2015 in comparison to the previous year 4

Fairmas Trendbarometer 8

In Focus 16

Disclaimer 24

Fairmas Gesellschaft für Marktanalysen mbH | Sachsendamm 6 | 10829 Berlin | www.fairmas.com Solutions Dot WG GmbH | Kranzerstraße 6-7 | 14199 Berlin | www.solutionsdotwg.com© 2014 Fairmas GmbH/Solutions Dot WG GmbH

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Dear readers,

The charm of a grand hotel or stylish minimalism? Being spoiled by comprehensive five-star luxury service

or being given just the very basics? When low-priced hotels were opened in German cities during the

economic crisis year of 2008/09, not a few industry experts rubbed their eyes in disbelief. Just a flash in

the pan? The hotel trade’s own economic miracle? The experts still have trouble defining budget hotels,

because it is far too simple to define them solely by price. In this month’s central topic, we deal with the

thought-provoking question of which market has the greater growth potential – luxury or budget? Whilst

the media are primarily focusing on budget hotels as the new kids on the block, we went in search of ob-

jective answers, with reliable Fairmas industry figures as the basis for our analysis.

Although this spring has shown serious weaknesses, the latest trade statistics for the metropolitan re-

gions do show a stable “area of high pressure”. The Fairmas Hotel-Ticker reports on this in detail.

The editorial team hopes you gain some stimulating insights from reading the Fairmas Hotel Report.

(Gabriele Kiessling & Nadine Kilian)

Solutions Dot WG GmbH | Kranzerstraße 6-7 | 14199 Berlin | www.solutionsdotwg.comFairmas Gesellschaft für Marktanalysen mbH | Sachsendamm 6 | 10829 Berlin | www.fairmas.com © 2014 Fairmas GmbH/Solutions Dot WG GmbH

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March 2015 in comparison to the previous year1

A brief overview of hotel performances at selected German destinations:

1 All the figures (daily collected) quoted are comparisons with those for the previous year, rounded to full amounts Source: Fairmas GmbH/STR Global, Data as of 01.04.2015

Berlin

Occ: 74%, ADR: €92, RevPar: €68

The Berlin hotel industry enjoyed a great March.

The month had already started well enough with

the ITB tourist event (4 to 8 March 2014), which

was the subject of more advance bookings this

year than last. The lengths of stay for the trade

fair were higher, resulting in three fairly well booked

exhibition days, instead of more or less two, as in

previous years. The month also saw some confer-

ences and small trade shows, including the Pneu-

mology Congress (18 to 21 March 2014) and the

“Wasser Berlin” event (24 to 27 March 2014), which

both boosted occupancy and ADR. Overall, group

business was far better than last year, with many

tourists arriving, especially at weekends, thanks to

the good weather. Corporate demand was also

high. The Easter school holidays only began on

30 March 2014, which meant a whole week more

business sector trade than last year. Occupancy

increased by 7% year-on-year, with room rates up

by 3%. This led to a healthy (10%) increase in Rev-

Par.

Cologne/Bonn

Occ: 74%, ADR: €125, RevPar: €92

The hotel industry in Cologne/Bonn also had a

great start to the spring. March was marked by

very high room rate increases (up 29%). Occu-

pancy grew significantly (by 8%). Both led to a su-

perb (40%) leap in RevPar. The IDS (international

dental show), which commands very high prices,

is held every three years. This year it took place for

the 36th time from 10 to 14 March. Cologne was

almost fully booked out during the period. There

was also the popular “Anuga Foodtec” event,

which takes place only every three years, this year

from 24 to 27 March. Again, occupancy was very

high, because this trade fair is very much in de-

mand. Many hotels were sold out. Two full weeks

of business sector trade with very strong demand,

as well as a generally unexpected high demand in


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all segments throughout the entire month rounded

off a “mad March”.

Dresden

Occ: 54%, ADR: €66, RevPar: €36

The last Trendbarometer had predicted an ex-

tremely weak March in Dresden. Luckily, this was

not to be the case. Performance actually increased

on a year-on-year basis. Occupancy increased by

2%, ADR also rose, though only slightly, by 0.3%.

RevPar thus increased by over 2%. No conven-

tions were held in the city in March. In addition,

many hotels suspect the coverage of the “Pegida”

demonstrations as being the reason for dwindling

business, especially in the leisure segment. The

otherwise good leisure sector trade at the week-

ends has actually declined. Nevertheless, good

business sector trade can be expected through-

out the month, as the Easter school holidays in

Saxony do not begin until April. Some conventions

and events also had a positive impact on the per-

formance figures.

Dusseldorf

Occ: 73%, ADR: €112, RevPar: €82

Occupancy in Dusseldorf rose significantly (7%)

in March. Carnival was held in February this year;

hence, four full business weeks could be sold. The

“IDS” in Cologne (10 to 14 March 2015) did provide

some overflow business for Dusseldorf, while the

“ProWein” wine event (15 to 17 March 2015) has

gained in popularity from year to year. The “Beauty”

trade fair (27 to 29 March 2015), was also held.

This resulted in good occupancy figures in the

city. The situation was similar with the “Top Hair”

event (28 to 29 March 2015). Furthermore, hotel-

iers reported ample MICE and corporate business.

Overall, it was a very good start to the spring in

Dusseldorf with an increase in RevPar of 40%.

Frankfurt

Occ: 71%, ADR: €123, RevPar: €88

Overall performance in Frankfurt was very positive

because the price-sensitive 2015 Carnival period

was entirely in February. This year, the important

ISH trade fair, held every two years, also took

place. This meant that room rates significantly (+

4%) higher than last year’s could be achieved in

the city, just as predicted by the Trendbarometer.

Despite the Easter school vacations and the public

holidays, which were two weeks earlier this year,

RevPar increased by an extremely positive 7%.

Hamburg

Occ: 78%, ADR: €106, RevPar: €83

Growth in March was predicted for Hamburg, and

this just how it was to turn out. Hamburg was able

to report an ADR increase of 4%, due to a very

strong national event (INTERNORGA), as well as

an international one (a medical congress), and the

city experienced a 4% year-on-year growth in ADR

with correspondingly high demand in the MICE


Page | 6


sector. This year, CeBIT was held in the same

week as the INTERNORGA event, which gave ho-

teliers the chance to look back on an overall posi-

tive development (RevPar up 5%).

Munich

Occ: 73%, ADR: €109, RevPar: €80

Munich also reported impressive figures for March.

Occupancy improved by 4%, with ADR up by

0.6%. RevPar thus rose by 5%. Last year, the win-

ter school holidays in Bavaria fell entirely in Febru-

ary while the Easter school vacations are largely

in April. This led to a sharp increase in business

travel volumes compared to last year. Conference

business was consequently much improved. This

all had a very positive impact on both occupancy

and ADR. Trade in the group and corporate group

sectors was better. Generally, demand was high

in all segments, and the willingness to buy upsold

products has increased. There was also great de-

mand for Bayern Munich’s games in the Cham-

pions League, the German Cup and Bundesliga.

Major events at the Technical University of Munich

and in the “Gasteig” also meant good trade for ho-

tels near these venues.


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Overview of all destinations

2015 2014 Var. Var. % 2015 2014 Var. Var. % 2015 2014 Var. Var. %

Berlin 73,9% 69,2% 4,7 6,8% 91,9 89,4 2,5 2,8% 67,9 61,9 6,0 9,7%Cologne/Bonn 73,5% 67,8% 5,7 8,4% 124,5 96,5 28,0 29,0% 91,5 65,5 26,0 39,7%Dresden 54,0% 52,9% 1,1 2,1% 65,8 65,6 0,2 0,3% 35,5 34,7 0,8 2,3%Dusseldorf 72,9% 68,0% 4,9 7,2% 112,4 108,7 3,7 3,4% 81,9 74,0 7,9 10,7%Frankfurt 71,1% 69,2% 1,9 2,7% 123,3 118,5 4,8 4,1% 87,7 82,0 5,7 7,0%Hamburg 78,3% 77,6% 0,7 0,9% 106,4 102,1 4,3 4,2% 83,3 79,2 4,1 5,2%Munich 73,3% 70,5% 2,8 4,0% 108,9 108,3 0,6 0,6% 79,8 76,3 3,5 4,6%

*Source: Fairmas GmbH / STR Global, based on data from participants with daily data entry, Data as of 31.03.15

LegendOcc OccupancyAdr Average Daily Rate (net rooms revenue)RevPar Revenue per available Room (net logistics revenue per available room)

Hotel Performance March 2015 /2014*

Occupancy in % Average Daily Rate in Euro RevPar in Euro


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Fig.1: Trendbarometer Berlin 2015 – Trend versus last year

4,2%

-4,7%

1,1%

4,3%

-4,6%

20,1%

8,8%

-9,1%

21,4%

April

May

June

Last Year

Occ ADR RevPar

Source: Fairmas GmbH / Data as of 08.04.2015

Fairmas Trendbarometer

A peek into the future – in detail:

Berlin

The forecasts for April are very reliable. This year,

fewer days of April will be taken up by school

holidays. Hoteliers in Berlin are expecting many

tourists, especially over the Easter weekend and

during the school holidays.

Demand is high and very en-

couraging in the group sec-

tor in particular. High-priced

business sector and conven-

tion trade, especially after the

school holidays, rounds off the

generally optimistic prospects.

The DDG Congress, which be-

gins on April 29, is very well

booked. Occupancy is set to

increase clearly (by 4%), as

are room rates (up 6%). The

underlying good business in the group segment

means that higher room rates can be sought. And

hotels are expecting some short-term corporate

business in the second half of the month. RevPar

is expected to grow by 9%. Preliminary booking

levels are more than promising in all segments.

The projections for May are not nearly as respect-

able. Last year, the ILA air show was held in May.

However, the ILA is only held every two years, so

that the healthy occupancy figures and room rates

it leads to will be missing this year. In addition, the

holidays and long weekend around the first of May,

Ascension and Whitsun all fall in May this year,

so making the month less than satisfactory for

business guests. Berlin is also popular with tour-

ists though, which means that the city’s hoteliers


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anticipate correspondingly good leisure-sector

business and fine weather. However, forecasts are

subdued for the time being. Falls in occupancy

and ADR (both by around 5%) are expected, lead-

ing to a 9% drop in RevPar.

The forecasts for June already look far better. An

increase of 1% in occupancy is expected. Howev-

er, there will also be a very high (20%) year-on-year

increase in room rates (RevPar: +21%). On June

6, the Champions League final, which is already

completely sold out, will ensure a huge surge in

demand over the entire weekend. Room rates

will reach levels similar to those achieved during

the 2006 World Cup final in Berlin. Other events

include the Hauptstadtkongress (Capital City Con-

gress, 10 to 12 June 2014) and the EAN Congress

(20 to 23 June 2015), both of which are already

well booked. All public holidays fall in May this year

(some of them were in June last year). This leaves

four full business weeks, for which demand is very

good. Hoteliers are very confident.

Cologne/Bonn

The last Trendbarometer foresaw no good news

as far as April was concerned. However, expecta-

tions have clearly been revised upwards. Demand

for the FIBO trade fair (9 to 12 April 2015) came

very late, but it did arrive, significantly stronger and

highly priced than had previously been thought

possible. Although this trade fair is always attrac-

tive and has slowly established itself in Cologne,

visitors are much more price-sensitive at week-

ends. The week after Easter is normally much

weaker, although the FIBO trade fair does provide

somewhat more business at this time. Compared

to last year, fewer days of the

Easter school holidays fall in

April, which will greatly boost

the number of business visi-

tors. Occupancy is expected to

rise by 3% and room rates by

a year-on-year 3%, so that a

5% rise in RevPAR is expected.

Agreeable weather over the long

Easter weekend and during the

school holidays may bring the

Fig.2: Trendbarometer Cologne/Bonn 2015 – Trend versus last year

2,6%

-4,2%

3,6%

2,5%

-0,3%

5,1%

5,2%

-4,6%

8,8%

April

May

June

Last Year

Occ Adr RevPar



Page | 10


city a little more short-term leisure business. Here

too, preliminary bookings are good.

Hoteliers in Cologne and Bonn are undecided

about the forecasts for May. The “Interzum” (furni-

ture industry trade fair) is being held again from 5 to

8 May after two years’ absence. Hoteliers expect

relevant inquiries over the next few weeks. Hotels

are also expecting short-term bookings for the last

weekend in May, when the LANXESS arena again

holds the “Champions League Final4” team hand-

ball event. The public holidays and long weekends

could, of course, attract a great deal of leisure

business to the city at short notice if the weather

conditions are favourable. The “FESPA” show, an

event held at different venues was supposed to

have a great deal of potential, but there have been

many cancellations in the past few weeks. Never-

theless, hotels are still cautious and expect a fall of

4% in occupancy. Room rates

are likely to decline slightly (by

0.3%). That would mean a de-

cline in RevPar of almost 5%.

June, however, will be very

good. Demand is strong in all

segments, be it leisure, busi-

ness sector or conference

business. The “ANGA COM”

and the “VICTAM” (together

with the “FIAAP” and “grapas”

events) are being held at the beginning of June,

both at the same time (9 to 11 June 2015). The

GIFA trade show in Dusseldorf (16 to 20 June

2015) will provides plenty of overflow business in

Cologne. In addition, the public holidays all fall in

May, so that four full business weeks are also avail-

able in Cologne/Bonn. Major concerts by Helene

Fischer (on 15 and 16 June) and AC/DC (19 June

2015) are generating further business. And good

weather will (given the right circumstances) ensure

even more spur-of-the-moment city breaks. Over-

all, occupancy is expected to be 4% up on last

year’s figure and room rates by 5% (with RevPar

up 9%).

Dresden

Dresden hotel industry was originally more confi-

dent with its expectations for April. Unfortunately,

these healthy projections have had to be adjusted

Fig.3: Trendbarometer Dresden 2015 – Trend versus last year

-1,4%

2,0%

2,4%

-0,6%

-2,0%

2,6%

-2,0%

-0,1%

5,1%

April

May

June

Last Year

Occ Adr RevPar



Page | 11


downwards. More leisure sector business had

been expected at Easter. The Easter holidays are

earlier than last year, which will mean that fewer

tourists will visit the city because of the worse

weather conditions being experienced this year.

Hotels are still anticipating healthy tourist business

during the school vacations and public holidays.

The second half of the month has also been devel-

oping slowly; so far the meeting and group book-

ings figures have hardly been promising. Hoteliers

are thus expecting a 1% slide in occupancy in

April. The hotels assume a generally declining ADR

(down 0.6%). This would also mean a 2% drop in

RevPar compared to last year.

The hotel industry in Dresden is hoping for some

improvement for May. It is likely to be warmer and

that the sun will be shining and so the number of

tourists in the city will rise. The long weekends

around 1 May, Ascension Day (both in May this

year) give rise to hope for improved performance

figures. Moreover, the G7 Summit of Finance Min-

isters is being held in the city (27 to 30 May 2015),

and many inquiries have already been made in re-

lation to it. However, the expected large allocation

bookings from individual delegations have so far

been absent, unfortunately. In terms of occupancy,

the hotels do not expect any very large changes

compared to last year. Occupancy is expected to

increase by 2%. However, ADR is predicted to fall

by 2%, which would mean a 0.1% decrease in

RevPar.

June was not a particularly successful month in

Dresden last year but things could well be better

this time around. Increases of 2% in occupancy

and 3% in ADR are predicted. Since all the public

holidays fall in May, the city’s hotels are hoping for

a strong increase in demand from business and

meeting sector business in June. This traditionally

means higher room rates than in the leisure and

groups sectors. Beautiful weather could also at-

tract large numbers of tourists to the city, espe-

cially at the weekends. Even if there are no trade

fairs or congresses in Dresden this June, there is

much going on in the city with the “BRN” event,

the movie nights on the banks of the Elbe and the

“Elbhangfest”. Hoteliers remain optimistic and ex-

pect a 5% RevPAR increase.

Dusseldorf

Expectations for April are again exceptionally

gloomy, with a projected 28% drop in RevPar,

mainly due to the high (over 27%) fall in room rates.

This is mainly due to the absence of the important

“Wire & Tube” trade show (held only every other

year) in 2015. Hoteliers are still hoping that the

positive predictions in terms of occupancy (Occ:

up 0.1%) will be achieved, due to growing leisure

business at Easter.


Page | 12


According to the Trendbarometer, May will be very

negative as far as all three indicators are con-

cerned (Occ down by 16%, ADR by 41%, and

RevPar falling by a massive 51%). There are many

public holidays this May, including Whitsun (Pente-

cost), which fell in June last year. There will thus be

much less corporate and MICE business this year

than in 2014. In addition, the “Interpack” trade fair

was held in May 2014. It is only due to take place

again in 2017 (it is held every three years).

June is looking very good, as at many other des-

tinations, especially when it comes to the forecast

room rates (ADR: +36%). Very high room rate lev-

els are also expected thanks to the A-list trade fair

“GIFA” (held every four years) running from June 16

to 20. High demand in the MICE and corporate

segments has so far been reported for the remain-

ing weeks of June.

Frankfurt

The absence of the “Light & Building” event from

Frankfurt this year (the last one was held from 30

March to 4 April 2014) had a very adverse effect on

room rates in April, with ADR down by 4%. Even

though this year’s “Musikmesse” is in demand, it

is unable to sustain the room rate levels achieved

by the “Light & Building” event. Experience shows

that little corporate business can be expected dur-

ing the Easter school holidays (the first two weeks

of April this year). The “Musikmesse” will only re-

turn in the third week of April, so

that hoteliers can merely expect

an increase in room rates from

the end of the month onwards.

The pick-up for this, howev-

er, will only become apparent

much later.

There is one more public holi-

day this May than a year ago,

and this will affect corporate

business in terms of occupan-

cy (Occ down 7%). However,

higher room rates (up 4%) are

expected. This year, the “Techtextil/Techprocess”

event (last held in 2013) is taking place. Even

though this is not an A-list trade fair, it may still

Fig.4: Trendbarometer Dusseldorf 2015 – Trend versus last year

0,1%

-15,9%

4,4%

-27,7%

-41,4%

36,1%

-27,6%

-50,7%

42,1%

April

May

June

Last Year

Occ Adr RevPar



Page | 13


raise ADR. It can be assumed that pick-up will still

develop overall.

So far, forecasts for June have been very optimis-

tic as far as all three key indicators are concerned

(Occ: +14%, ADR: +25%, and RevPar: +43%).

This year, the leading ACHEMA trade fair (held eve-

ry three years) will be held from the 15 to 19 June

2015. High room rate levels are expected during

this period. Moreover, there are no further public

holidays or school vacations in June except for

one public holiday (Corpus Christi) in the first week

of June. Otherwise, the remaining weeks of June

will be for conference and corporate business.

Hamburg

The outlook for April in Hamburg is also positive

in terms of all three indicators (Occ: +4.5%, ADR:

+3.4% and RevPar: +8.1%). An increase in room

rates is expected because of

the strong international trade

fair (International Aircraft In-

terior) and the annual Haspa

Marathon (held in May last year).

Leisure segment demand at

Easter is already very satisfac-

tory, especially at the weekend.

April is generally a very lively

business month in Hamburg,

demonstrating stability as far as

the business groups and MICE

segments are concerned.

This year’s “Hafengeburtstag” (Harbour Birthday) is

again generating high demand. Furthermore, this

year’s May Day public holiday falls on a Friday, so

that travellers need not take an extra day off work

to enjoy a long weekend. Many hoteliers have

already reported very good advance bookings

thanks to high-price leisure business. This year’s

Röntgenkongress (Congress of Radiology) from 13

to 16 May, being held in Hamburg for the last time,

will ensure a 3% increase in room rates. Overall, a

4% RevPar increase is expected in May.

June, according to hoteliers’ statements, is also

developing quite positively with an overall increase

in RevPar of nearly 6%. The International Hafen-

kongress (Port Congress; 1 to 4 June 2015) , as

well as various sporting highlights, such as the

Fig.5: Trendbarometer Frankfurt 2015 – Trend versus last year

4,0%

-7,3%

14,0%

-4,0%

4,0%

25,3%

-0,2%

-3,6%

42,9%

April

May

June

Last Year

Occ Adr RevPar



Page | 14


“IGLFA” (International Gay and Lesbian Football As-

sociation) Euro Cup and the “Harley Days” at the

last weekend in June (last year it took place in July)

are generating high demand in the city.

Munich

Hoteliers in Munich will also have to wait to see

how the weather will be at Easter. Good weather

could mean a great deal of short-term business.

Occupancy is expected to rise by 0.1%. No trade

fairs are being held in Munich this April but the

Easter holidays come at the right time, so leaving

three full business weeks in April, a month which

is also expected to enjoy good business sector

trade. Then there is also the first of May, which

falls on a Friday this year, so making the business

week one day longer than in 2014 (last year, May 1

fell on a Thursday). Leisure sector demand is also

high, especially during the school holidays and at

the weekends. A major soccer

match is also being played on

the last holiday weekend. Con-

sequently, hoteliers are confi-

dent of an improvement in room

rates (+1%) and hence a 1% in-

crease in RevPar.

There is little optimism in the

Munich hoteliers’ forecasts for

May. This year, the IFAT event is

not taking place. The “transport

logistic” (5 to 8 May) will not be able to compen-

sate for the lack of business visitors and high room

rates. The number of public and school holidays

will also push room rates down. It will be difficult

to get supply and demand to match up because

inquiries are focused on just a few short periods.

A great deal of short-term top-up business is ex-

pected, especially from the individual and group

segments, as well as wholesale business, which

forces down room rates. Occupancy is expected

to decline by 1% and ADR is predicted to fall by

as much as 7%, leading to an 8% drop in RevPar.

June should be much better, as in many other plac-

es. Far fewer public holidays fall in June than last

year, and only one week of the Whitsun holidays

does. This allows much more room for business

sector trade than last year. However, Ramadan be-

gins earlier than in 2014 (18 June 2015), meaning

Fig.6: Trendbarometer Hamburg 2015 – Trend versus last year

4,5%

1,2%

2,2%

3,4%

2,7%

3,2%

8,1%

3,9%

5,5%

April

May

June

Last Year

Occ Adr RevPar



Page | 15


that Arab guests will leave even

earlier. However, Munich hotel-

iers do expect some additional

business from the G7 summit at

Schloss Elmau. An occupancy

increase of 2% and an ADR

increase of 6% are confidently

expected. This would boost

RevPar by almost 8%. And

good weather at the weekends

and during the holidays will

surely lead to some extra leisure

business.

Fig.7: Trendbarometer Munich 2015 – Trend versus last year

0,1%

-1,2%

1,9%

1,2%

-7,2%

5,6%

1,3%

-8,2%

7,5%

April

May

June

Last Year

Occ Adr RevPar



Page | 16


In Focus

Five stars on Mayfair or no frills next door?

Luxury versus budget – which is growing faster? Who is winning the race?

From the charm of historic grand hotels to the sustainable coolness of urban lifestyles - luxury hotels are

either legendary or have what it takes to become so. This segment in particular has had to recover from

commercial losses following the economic and financial crisis of 2009. The sharp decline in business

overnight stays has revealed one major cause of the low price levels in the German luxury hotel segment:

overcapacities.

Despite an upward movement (first quarter 2015

compared to last year: Occ +1.5%, ADR +4.1%,

and RevPar +5.0%), five-star hotels in Germany

are still marked by lower room rates than in other

leading countries worldwide. This is confirmed by

the latest figures: In 2014, average room rates in

the five-star segment only rose slightly (by 1.1%),

reaching a net average of €157. In 2014, the aver-

age room revenue (RevPar) increased by 3.3% to

€111. With these values, the German luxury hotel

market again only occupies a place towards the

bottom in European and international compari-

son. In particular, luxury-aware international tour-

ists, mainly from the Gulf States, Russia or China

are still generating moderate growth, preferably

at such destinations as Munich, Dusseldorf and

Hamburg. For many, a night in a luxury hotel is the

norm. Of course, these well-heeled guests are be-

ing wooed by five-star hotels, leading to increased

market pressures in the top-class segment.

Although the evaluation criteria for the upmarket

hotel industry are clearly defined, in this sector in

particular, (alongside gold-plated taps) the intangi-

ble aspects of perfect hospitality, in which wishes

are met even before they have been expressed,

are what counts today.

In recent years, however, the budget hotel seg-

ment – above all – has attracted more and more

media coverage. Even experts have problems in

finding definitions for this youngest member of the


Page | 17


this can be explained by trade show cycles or on

the other hand by very diverse clienteles. For ex-

ample, the five-star hotel trade in Hamburg was

able to increase its RevPar by an average of 4.8%

annually between 2011 and 2014. Hamburg even

has a number of flagship luxury sector hotels,

which can attract guests just by their name alone.

Fully booked houses are more common here than

anywhere else in Germany. The number of visitors

from the Gulf States to Hamburg is continuing

to grow. These guests often stay for a long time

– generally in conjunction with medical treatment –

and book into luxury hotels. In contrast, the annual

3.3% growth rate for the city’s budget hotels does

seem relatively weak.

Similar developments can also be observed in

Dusseldorf, Cologne, Frankfurt and Munich. Only

in Berlin is everything is different again ... we will

now highlight the inhomogeneity of the trends and

their causes in more detail using the examples of

Berlin and Munich.

Berlin

Along with London and Paris, Berlin is one of the

well frequented capitals of Europe. The variety of

attractions, the cultural offerings, the city’s special

history, the tolerant, multicultural and yet still unfin-

ished atmosphere all generate an ever-increasing

hotel family. Definitions based on price alone have

long since proved themselves impractical. Budget

hotels are consistently endorsed as having attrib-

utes that can be best described as “no frills” – a

product with a great price-performance ratio and

a clearly defined standard level. It has long been

clear that budget hotels are not an economic flash

in the pan; they often boast a prime downtown lo-

cation, modern design and modular service.

The latest Fairmas figures also show the model’s

potential: (the first quarter of 2015 compared

with the same period last year: Occ: +4.3%, ADR

+1.6%, RevPar: +3.9%). The average room rate in

the budget segment grew by 2% in 2014, reaching

a net average value of €64. In 2014, the average

room revenue (RevPar) rose 2.5% to €47 – some-

what weaker than the five –star market. Are the

luxury hotels really the winners?

Meanwhile, even industry giants such as Intercon-

tinental and Hilton have discovered the socially

acceptable and sensitive market of budget hotels

for themselves; the cake seems to be a large one

that whets the appetite. This raises the interest-

ing question of which growth market has the larger

potential: the luxury or budget sector?

Overall analysis reveals a general trend of growth

for both segments. However, the differences are

huge, depending on the destination. For one thing,


Page | 18


number of overnight

stays. New record

visitor numbers are

recorded every year,

figures that no other

German city can

compete with. There

have also been re-

cord numbers of

conferences. How-

ever, the City Cube

as successor to the International Congress Center

has nowhere near enough capacity to replace the

ICC completely. In the past, many events have had

to be called off in the past, and it will not be possi-

ble to satisfy the large demand in the future, either.

However, the city was bottom in terms of net aver-

age rates. Here, Berlin lags far behind comparable

European competitors. Berlin is regarded as the

“capital of the small prices” and is one of Europe’s

most competitive

hotel markets. The

low average prices

are observed princi-

pally in the upscale

and luxury market

sectors. Differences

in price are minor.

Here, the emerging

budget market has

been taking guests away from higher price-class

hotels in recent years following the onset of the

global economic and financial crisis. The reasons

are not least the increasing transparency of room

rates through online travel portals, but also the

young, price-conscious lifestyle public.

In terms of hotel performance (RevPar - revenue

per available room) an annual growth rate (CAGR

- compound annual growth rate: 2011-2014) of

Fig.8: Performance development – 5* hotels in Berlin

Var. Var.% Var. Var.% Var. Var.%

2014 74,3% 3,0 4,2% 63,3 6,3 11,1% 47,0 6,4 15,7%2013 71,3% -2,0 -2,7% 57,0 -0,9 -1,6% 40,6 -1,8 -4,2%2012 73,3% 0,8 1,1% 57,9 2,4 4,3% 42,4 2,2 5,5%2011 72,5% 55,5 40,2Compound Annual Growth Rate (CAGR)

0,82% 4,48% 5,34%

Berlin Budget

Occupancy Average Daily Rate in Euro RevPar in Euro


Fig.9: Performance development – Budget hotels in Berlin


2014 74,1% -0,5 -0,7% 148,8 1,1 0,7% 110,3 0,1 0,1%2013 74,6% -0,3 -0,4% 147,7 -0,7 -0,5% 110,2 -1,0 -0,9%2012 74,9% 2,8 3,9% 148,4 7,6 5,4% 111,2 9,6 9,5%2011 72,1% 140,8 101,5Compound Annual Growth Rate (CAGR)

0,92% 1,86% 2,79%

Berlin 5*




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over 5% has been recorded in the budget seg-

ment and 2.8% in the five-star market over the

last three years. Berlin is marked by steady and

healthy growth, especially in terms of budget ho-

tels, even though several new hotels have entered

the market, particularly in this segment. In contrast,

the 350 new five-star rooms in 2014 already seem

quite modest.

The very strong demand even allows budget hotels

to increase the room rates. There was therefore

a sharp (11%) upturn in room rates compared to

last year, resulting in a seemingly record-breaking

16% RevPar increase for 2014. The current perfor-

mance figures for the first quarter are also exciting.

While RevPar in the budget range increased year-

on-year from €34.7 to €40.3 (a plus of 16%), the

figures in the five-star range only show a moderate

growth, with a 0.5% increase in RevPar compared

to the first quarter of 2014.

In recent years, the changes in business custom-

ers’ travel behaviour have increasingly led to a fall

in demand in luxury business and conference ho-

tels. Overnight stays in the new, sometimes very

stylish budget hotels have been the norm pursued

in many companies. These hotels impress cus-

tomers with their affordable prices and innovative

concepts in attractive inner-city locations. The

publicity centred on the budget hotels is further

boosted as demand grows and the trend towards

short-term city breaks increases (taking the whole

family along where possible). Meanwhile, a highly

varied product range has developed involving

many different market players, which increasingly

links the emotional aura of “budget as an experi-

ence” and “budget is trend” with the demand for

individual products.

In the capital, the positive development in the

budget range can also be clearly felt; it is espe-

cially noticeable in the months of weak demand.

And the signs are pointing to further growth. Both

the Berlin branch of the German Hotel and Restau-

rant Association (DEHOGA), as well as “visitBerlin”

(Berlin’s tourism marketing organization) assume

that the capital will record more than 30 million

overnight stays by the end of 2016.

The Berlin hotel market is not only the largest in Eu-

rope, but clearly also the most exciting and most

turbulent. Trends are born here: the rapidly grow-

ing and colourful budget segment is one of them!

Munich

For the twelfth year in a row, tourism figures for

Munich have known only one direction: upwards.

In 2014, the Bavarian capital recorded 13.4 mil-

lion overnight stays - an increase of 4.3 percent

over the year before. Most visitors came from


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German-speaking countries, though the number

of international guests from further afield also rose

briskly.

In 2014, the five-star hotel trade in Munich ben-

efited from a very strong trade show year and from

many major medical

congresses. This

clientele does not

belong to the des-

ignated target group

of budget hotels.

Moreover, Munich

experienced a sharp

rise in demand from

Middle Eastern

guests last year. As

this target group is

very wealthy and stays mainly in four to five-star

hotels for a longer period, the budget segment will

not be able to benefit from this development. In ad-

dition, the higher categories of hotels also benefit

from large groups, events and conventions, which

then are preferably

held in five-star ho-

tels.

This is also con-

firmed by the growth

rate (analysis period

2011-2014), dur-

ing which Munich

(together with Dus-

seldorf) holds the

top spot. These two

cities are the front-runners in the luxury segment

with annual growth of 7.6%. During the first quar-

ter in Munich, the Occ, ADR and RevPar in both

the budget and luxury sectors were exceptionally

Fig.10: Performance development– 5* hotels in Munich


2014 79,8% 2,5 3,2% 225,9 7,6 3,5% 180,3 11,5 6,8%2013 77,3% -0,3 -0,4% 218,3 14,3 7,0% 168,7 10,4 6,6%2012 77,6% 0,8 1,0% 204,0 15,7 8,3% 158,3 13,7 9,5%2011 76,8% 188,3 144,6Compound Annual Growth Rate (CAGR)

1,29% 6,26% 7,62%

Munich 5*



Fig.11: Performance development– Budget hotels in Munich


2014 78,4% 1,8 2,3% 74,5 -3,8 -4,9% 58,4 -1,6 -2,6%2013 76,6% 0,1 0,1% 78,3 3,5 4,7% 60,0 2,8 4,8%2012 76,5% 1,9 2,5% 74,8 6,2 9,0% 57,2 6,0 11,8%2011 74,6% 68,6 51,2Compound Annual Growth Rate (CAGR)

1,67% 2,79% 4,50%

Munich Budget




Page | 21


good, with RevPar increases of over 20% in the

budget segment and 13.2% in the five-star hotels

when compared to the first quarter of 2014.

If one again looks more closely at the occupancy

rates (nearly 80% in in both segments), it is clear

that there is little room left for improvement here.

Last year, some new competitors also came on

the scene. Compared to Berlin, the ADR of the

budget hotels is very high. It can be assumed that

the average room rates of the five-star hotels will

also have a positive influence on the ADR of the

budget hotels

Conclusion

The industry is growing: this positive signal delights the hosts, and the certainty it means is helping to cope

with seasonal “dry spells”.

For the trade show destinations, 2014 was a strong year overall, which positively influenced the high room

rates in the corporate and MICE segments of the luxury market.

If we differentiated further, some major disparities are revealed. Whilst in Berlin, the budget hotels were

the industry’s high fliers in 2014 (RevPar up 16%), there was a slowdown over the same period in Munich,

with RevPar falling by 3%. A very different picture between the two cities is revealed in the five-star hotel

business. {Hier wuchs die Hauptstadt moderat (RevPar: + 0,1%), während die Münchner Hoteliers im

Luxussegment ordentlich zulegten (RevPar: + 7%). |Here, growth in Berlin was very moderate (RevPar up

0.1%), while Munich’s luxury-segment hoteliers experienced healthy expansion (RevPar: + 7%). This is not

least due to the different target groups.

Many budget hotels (especially chains such as Motel One) appeal especially to the younger generation

with their bright interiors and the great value that they offer; guests know what they are getting for their

money. This is confirmed by business travellers, who will be able to find the modern technical equipment

they require and much more besides at their actual destination (i.e. little of it at the hotel). And yet, the trend

towards greater luxury is unmistakable in this target group too: pleasure as quality of life. Fewer golden


Page | 22


taps and instead much greater freedom and self-determination: because as before, the diverse luxury seg-

ment has lost none of its appeal (and for some it is a distinctive status symbol). The boom in the upmarket

sector is especially fascinating for young, up-and-coming decision-makers. However, this means that new

approaches are demanded in the luxury sector in terms of marketing and sales (omnipresent multimedia

possibilities, maintaining the sensitive balance between technical all-round solutions, a personal approach

to guests, and so on).

Above all, the guests’ decisions reveal tolerance and an enjoyment of change and discovery: they want

both: The low-budget hotel on a business trip and the luxury spa at the weekend or simply comfort during

business and “no frills” during a weekend city trip with the whole family. This way, both sectors will benefit.

The expansion of the budget hotels is occurring at the expense of small, privately owned hotels and board-

ing houses, which are often being forced to their financial limits. While the latter often lack the resources

needed for investment, the budget hotels are able to win over guests with their modern diversity and stylish

profile. However, by no means everything that glitters is gold: Many budget hotels are operated as fran-

chises, and their quality may differ greatly in terms of service and compliance with standards.

Would you like to have more information?

Every day we collect data from over 1,100 hotels in Germany: up-to-date information

on the German hotel market with a large amount of relevant market data.

Call us on +49 30 322 940 520


Page | 23


The Fairmas Hotel Report is published by:

Fairmas Gesellschaft für Marktanalysen mbH, Sachsendamm 6, 10829 Berlin, Deutschland

Solutions Dot WG GmbH, Kranzer Strasse 6-7, 14199 Berlin, Deutschland

Fairmas Gesellschaft für Marktanalysen mbH specializes in market

analyses and the development of planning and controlling software

for the hotel industry. The company offers its international clientele a

hotel benchmarking platform, as well as various software applications

for the fields of budgeting, forecasting, controlling, management re-

porting and work process optimization.

As a strategic management consultancy, Solutions Dot WG develops

individual and customized strategies and solutions for companies in

the hotel, catering and tourism, and provides support in implementing

plans. Solutions dot also manages independent project implementa-

tion, is active in support management and interim management, as

well as in the total quality management (TQM) sector.

The Fairmas Hotel Report is edited by:

Nadine Kilian, Marketing & Communications Manager,

Fairmas Gesellschaft für Marktanalysen mbH, e-mail: [email protected]

Gabriele Kiessling, Consultant und Project Management,

Solutions Dot WG GmbH, e-mail: [email protected]


Page | 24


Disclaimer

No representation or warranty (express or implied) is given as to the accuracy or complete-ness of the

information contained in this publication, and, to the extent permitted by law, Fairmas GmbH / Solutions

Dot WG do not accept or assume any liability, responsibility or duty of care for any consequences of you

or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for

any decision based on it.

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