Patience is key on Europe’s road to recovery

There’s a saying that “before things get better, they’ll get worse.” Unfortunately, Europe is aligning with that philosophy. Hotel performance will get better, but hoteliers are going to need to exercise a lot of patience in the meantime.

Europe ended 2020 the same as most other regions—with record-low performance. Occupancy fell to 33.1%, average daily rate (ADR) dropped to a mere EUR90.89 and revenue per available room (RevPAR) sank to just EUR30.05.

April was the worst-performing month for the year, as occupancy decreased to 11.4% due to tight restrictions across the continent. Things were looking up for Europe as summer rolled around and those restrictions ultimately eased. The warmer weather was surely good to hotels, as monthly occupancy reached a pandemic high of 43.3% in August. Performance worsened, however, as restrictions once again tightened after a new variant of COVID-19 was discovered. With more people back in lockdown, Europe ended the year with its lowest occupancy level since May.

Unfortunately, performance has not gotten much better since the early phase of that lockdown in December.

The silver linings

While tough to find, there was some good news. There were quite a few European markets that pulled ahead at the end of the year in terms of occupancy due to domestic demand.

European markets with the highest December 2020 occupancy:

1. Baku (51%)
2. Exeter (49%)
3. Moscow (45%)
4. Yekaterinburg (41%)
5. Marseille (41%)

Additionally, while overall performance for the continent was dismal, there were far fewer hotel closures than the early months of the pandemic. Nine of 10 hotels were closed during the first wave of the pandemic, but in mid-January 2021, nearly 80% of hotels remained open across Europe. Poland was the outlier, as the country fell to just 50% of rooms open in early January but climbed back to a higher percent in February. Hotels could, however, close again in the coming months if restrictions remain in place.

Looking ahead

According to Forward STAR, occupancy on the books for the next 90 days (as of 11 January 2021) is bleak. Each of the major markets remain below 10% occupancy during the next 90-day period. However, the metric does hit double-digits every so often in certain markets. Edinburgh sits at a 16% occupancy-on-the-books level on 27 March and 3 April, both Saturday dates. Dublin follows closely behind with a 15% level in the metric during the weekend of 19-20 March.

But as we mentioned at the beginning, a patient, long-term view is key. Travelers are still planning for events and booking hotel rooms in advance. Looking ahead 365 days, Glasgow’s hotel occupancy on the books is pushing 90% for the UN Climate Change Conference. For London, hotels are seeing higher occupancy on the books (21%) on 18 June, the day of the UEFA Euro group stage match between England and Scotland. Later in the year on 2 October, the day before the London Marathon, occupancy on the books sits at 15%. For most of 2021, however, London sits below 10% in the metric. 

Among other markets where STR tracks Forward STAR data, Edinburgh’s occupancy on the books reaches a high of 60.8% on 26 June. Barcelona is following suit, with its highest occupancy-on-the-books level on 29 June (47.4%). Amsterdam also surpasses a 40% level in the metric (42.1% on 9 September).  

Uneven recovery

So what does this mean for the future of the hotel industry? Once the most vulnerable are vaccinated, countries will feel confident in opening for domestic travel. For most markets around the world, domestic travel accounts for 60-80% of demand, so hotels should see some strong recovery of both business and leisure demand. Recovery will be uneven—there will most likely be slight demand spikes here and there, but it will take time to reach pre-pandemic levels.