Edinburgh, Glasgow and Manchester well positioned for Hotel market recovery once travel activity resumes
Edinburgh, Glasgow and Manchester are amongst the key European cities well positioned for Hotel performance recovery, based on the latest analysis of major European hotel markets by global real estate advisor, CBRE.
The report analyses future demand expectations across each major travel segment to identify which cities are likely to be most impacted. Markets with material exposure to leisure demand and a lower reliance on both international travel (particularly long-haul) and Meetings, Incentives, Conferences and Exhibition (MICE) demand are best positioned for a more rapid recovery.
Domestic travel will be the first to see a return of activity, according to the research. This will be predominantly supported by the gradual reopening of economic markets alongside the lifting of some travel restrictions. In 2019, 63% of tourism spend across Europe was from the domestic travel market, highlighting its importance in the sector.
Traditionally, Germany, the United Kingdom and Italy have the highest share of domestic tourism spend. This makes them well positioned for a more immediate recovery, notwithstanding the economic effect of Covid-19 at a country level and the consumer perception of risk which will differ by destination.
International travel demand will take longer to return, with short-haul recovering before long-haul. CBRE’s findings suggest that as a result of this, accommodation providers in gateway cities and airport locations will be most exposed to the limited volume of international travel demand.
Leisure travel is likely to see an immediate surge in demand, particularly staycations. Countryside and rural hotels across Europe are expected to benefit from this trend first, as travellers will initially seek to avoid densely populated locations.
Generally, the growth rate of corporate demand has been lower than the growth rate of leisure demand over the last decade, and whilst corporate travel will return as economic activity resumes, CBRE expects it to be limited and to remain below ‘normal’ levels for the short-to-medium term. Companies will look to recover their financial position before increasing spend on travel.
According to the report, international MICE is likely to be the most impacted segment and will take the longest to recover within the Hospitality sector. Cities such as Paris, Vienna, Madrid, Barcelona and Berlin are heavily exposed to the postponement and cancellation of large meetings and events. However, in the long-term these cities are well positioned to capitalise on the recovery in this segment given their availability of leading conference and exhibition space, infrastructure and connectivity.
Previous demand shocks in the hotel market show us that not all customer segments are impacted to the same degree, or indeed follow the same trajectory in terms of recovery. We anticipate that markets across Europe which have previously benefitted from strong domestic leisure demand are well positioned to lead the recovery cycle.