Recession Maintains Its Icy Grip on Italy.

While Silvio Berlusconi, three times Italian prime minister, faces prison for fraud, the web of cross-holdings between Italian banks, commerce and industry is unravelling and the economic outlook is bleak. The recession is likely to persist through 2013, with uncertainty whether the gentle recovery in Germany and France will help Italy up also. Cold comfort indeed for Italian hoteliers.

BVA BDRC’s 2013 Italy Hotel Guest Survey has revealed that the Italian domestic business and leisure hotel market is going through a tough period. The study was conducted amongst 789 business travellers and 636 leisure travellers, giving a representative sample of the hotel-staying Italian population.

Hospitality trading conditions were not optimal in Italy’s capital, Rome, or its industrial engine room, Milan. Occupancy declined in both cities in 2012 (0.7% for Rome, 2.6% for Milan). 2013 is expected to show Milan holding steady but Rome dropping a further 2.1%. This, believe it or not, is the good news. The rest of the Italian hotel market has been hard hit, after several years of stability, by declines in the domestic business market as well as domestic leisure.

Participation in the domestic business travel market was down over 10% from 2.8 to 2.5 million. The number of frequent business travellers also dropped, from 0.5 to 0.4 million. With reduced participation and restrictions on discretionary spend, domestic business nights were down more than 12%, from 47 million to 41 million. The greatest proportion of these travellers, a fifth, came from the industrial northern region of Lombardy, home to a sixth of Italy’s population and generating a fifth of its GDP.

There is a trend in Europe to see vacations (away from home) as a necessity rather than a luxury. Europeans get twice as many vacation days as Americans and they take them all. Notwithstanding that, tough economic conditions in Italy (including unemployment at 12%) have hit discretionary spend. The number of domestic leisure participants fell 4% in 2013, across both short breaks and longer stays, to 15.1 million adults. A subsequent drop in domestic room nights was inevitable. The study reported a fall for the second year running to 56 million room nights, down 11% from 63 million the previous year.

Interestingly, international leisure travel had not fallen nearly as much – down from 27 million to 26 million leisure nights. International travel is easy for Italians of course, with around 30 countries within 2 ½ hours flying time of Rome, and many of those destinations working hard (i.e. price cutting) to keep their share of the European tourist market. There is a trend to take shorter breaks, however.

Hilton retained top slot as the #1 ranked brand overall in BVA BDRC’s Hotel Brand Rankings. This year’s ‘Most Improved Brand’ award went to Best Western, which overtook midscale rival Holiday Inn to move into 2nd position, a consequence of increased brand
awareness and usage. Best Western also led on domestic business market share, taking an estimated 13% of nights spent by Italians in their own country. However, the scale of its distribution gave Best Western approximately 14% of the country’s branded room inventory.
Other brands showing notable improvement included Boscolo (particularly with business users), NH Hoteles, B&B Hotels and Hilton Garden Inn.

As many as a fifth of Italians still did not use the web as an information source on hotel stays. Business customers using the web favoured hotel group booking systems, while leisure customers preferred to contact hotels directly. Expedia remained the top travel site choice but competitors were making inroads as the search and booking market continued to mature, with TripAdvisor, Trivago (born in Munich in 2005) and Booking.com (owned by US company Priceline) all seeing an uplift in use.