German Leisure Guests to the Rescue!

Findings from BVA BDRC’s 2013 German Hotel Guest survey report a booming German leisure market – no doubt a welcome relief for European hoteliers.

Unlike much of Europe, the German hotel market has performed relatively well through the recent economic crisis. Of the 5 biggest European markets, only Germany delivered anything more than negligible growth in demand for hotel rooms over the last 12 months.

A booming German leisure market is indeed welcome relief for European hoteliers, but reports have not been all good news as the German corporate travel market has continued to contract. However, this has been more than compensated for by the growth of leisure. German hotels benefited from a 7% year-on-year increase in demand from Germans staying in hotels in their own country for leisure reasons, whilst the growth in outbound (international) German leisure volume was even higher at 11.8%, delivering an estimated 114 million international leisure room nights in the last 12 months. Hotels in Mediterranean destinations such as Spain, Italy and Turkey were the major beneficiaries.

Domestically, the outlook for German hotels is generally optimistic. The Ifo Business Climate Index, an early indicator for economic development in Germany, sat well above the December 2012 figure for the first few months of 2013 and rose for the 3rd consecutive month in July. RevPAR is forecast to rise a further 2-4% in 2013. Occupancy is likely to be steady, while rates are predicted to shift upwards. Furthermore, Germany remains an attractive market for hotel investors, with lenders more comfortable about offering credit than in most other European countries.

Germany is famous for its family-run Gasthäuser which tend to offer fairly basic accommodation, but when it comes to hotel brands, it is traditionally seen as an upscale-orientated market. However, the supply-side landscape of the German hotel industry is changing; Accor’s economy brand, Ibis (taken together with its sub-brand variants Ibis Budget and Ibis Styles), had the largest bedroom inventory in Germany; furthermore, local operator Motel One, also operating at the top end of the economy tier, more than doubled its presence in the last 4 years, while French brand B&B also expanded significantly in Germany.

Overall, the economy tier now accounts for an estimated fifth of branded German hotel room stock and is the most rapidly growing segment of the market. To set this in context, the British economy tier is almost twice as large as a proportion of total supply (41%), and the French almost three times as large (61%), which suggests that despite the recent expansion there remains significant latent growth potential. The study reported that the core Ibis brand had an estimated 8.3% of domestic German hotel market share for business stays, with only 5.8% of the country’s bedroom inventory, evidencing the view that economy brands are capable of out-performing the market.

Accor’s strategy of creating an Ibis ‘mega brand’ by re-badging its Etap and All Seasons hotels, allied to its ‘Big Bang’ international advertising campaign, appeared to be paying rich dividends in terms of brand equity, with Ibis comfortably emerging as the BVA BDRC ‘Most Improved Brand’ in Germany for 2013. Ibis is now the most widely used brand for both business and leisure by German travellers and, on the composite measure of brand equity, it overtook midscale competitor Holiday Inn, moving into 3rd place in the BVA BDRC Brand Ranking Index.

Despite only having a limited presence in Germany, Hilton once again emerged as the No.1 brand, finishing ahead of the pack on top-of-mind brand awareness, prompted brand recognition and leading choice. Hilton also enjoyed a very positive brand image, with strong associations with ‘luxury’, ‘style’, providing a ‘sense of high status’ and ‘makes me feel special’.