London Market Update | March 2009 | By James Chappell

To say the market has been extremely tough over the last few months would be a massive understatement. We can see the effects that the banking crisis is having, the wider implications of an economic slowdown in the UK and the knock on for our own industry. As clients you have been very supportive of us in the past, either when we were The Bench or HotelBenchmark and now as STR Global and we want to try and help as much as we can.

We are sitting on a large amount of quality market information, and whereas you have the ability to pull a lot of data through our website, you probably haven’t had the time to. In all market conditions, whether growing or contracting, we need to look at the specific market segment because they all behave differently. Midscale properties for example, will never grow or drop as much as Upscale hotels because they don’t have the same spread in rates available to the customer. In order to get a clear view of what is going on in the market, it is important to separate these out. The Excel sheet attached, clearly breaks out the segments. We would recommend that you find your segment and see if your performance is in line with your expectations and experience. Have a look at the other segments and ask yourselves, what is their strategy? Is it working? Is discounting my rate having the desired impact on RevPAR, or are we trying to stimulate demand that just isn’t there.

I have pulled some interesting results for London this year and we have highlighted the following:

Market Data

• The London Market as a whole, then sliced it down into our markets segments: Luxury, Upper Upscale, Upscale, Midscale with Food and Beverage, Midscale without Food and Beverage and Economy.
• The year on year change for the first three months of this year, individually and year to date total.
• We looked at ADR, Occupancy, RevPAR, Supply, Demand and Revenue.

Summary
London as a whole has fallen -8.6% in RevPAR, -5.7% in Occupancy and -3.1% in Room Rate. To give you some context, here is what other major European cities are doing:

• Amsterdam: -27.9%
• Berlin -6%
• Dublin -26%
• Madrid -26.6%
• Moscow -20.2
• Rome -17%
• Stockholm -0.1%

I have to say on the whole you can almost split Europe into North and South. The Northern European markets with the exception of Benelux, seem to be holding on a lot better and have had a marked lift from Europe. Southern European countries like Spain, Portugal and Italy saw no lift and are going to have an eye watering April as a result.

• The Good News: London experienced a March Easter lift, slowing the rate of decline across the board.
• The Bad News: Easter is mismatched again, so expect greater losses in April as a result.
• Supply growth as a whole has been fairly low, around 1.2% this year. Most of the growth has been in the Luxury segment, growing at 4.6% year to date.
• Year to date Room Rate has fallen the most in the Luxury category, falling -7.7%.
• Year to date Occupancy has fallen the most in the Luxury category, falling -7.7%.
• Year to date RevPAR has fallen the most in the Luxury category, falling -14.7%.
• Year to date Room Rate has fallen the least in the Midscale with F&B, growing 1.7%.
• Year to date Occupancy has fallen the least in the Upper Upscale category, falling -0.5%.
• Year to date RevPAR has fallen the least in the Midscale with F&B category, falling -5.4%.

We hope that you find the data interesting, illuminating but above all relevant to your experience of what is happening in the market. We will follow this up with an analysis of days of the week as well as including some more macro European data for you to look at. If you have any questions, please do not hesitate to contact me. Over the next few weeks, I will follow up with an update looking at days of the week, Market Forecasts ad wider European info.

Kind regards,

Jamie

JAMES CHAPPELL
Managing Director
STR Global