Hotel Market Report Vienna – COORE market beat 2017/Q1 2018

Stefan Csejtei

Jun 2018

BOOMING TURNOVERS, NUMEROUS DEALS WITH VOLUMES AHEAD OF 2017

The positive performance figures of the first six months of 2017 continued also in the second half of the year. Overnight stays in hotels and pensions increased by 2% – from 13,541,000 to 13,811,000. Overnight stays in all types of accommodations increased by 3.7% to 15,512,730, and this marks an increase by nearly 60% as compared to 2009.

The Revenues per available room (RevPAR)for 5* stars hotels have considerably recovered after 2016, and with an average of 136.2 € they are just below the peak year of 2015.There was also a clear recovery in the 4* segment, the RevPARs are slightly above 2015, amounting 58.6 €, and by 1.8% above 2016. The increase in the 3* segment is particularly striking, there was a significant boost of 6.3% in 2017 and 13.7% in 2016.

The positive trend in overnight stays will continue in 2018: there was a clear increase by 7.5% in Q1 2018 as compared to Q1 2017; however, this should be seen also from the perspective of the early Easter holidays. At the same time, RevPAR increased significantly in the first two months, on average by 17% – and especially in the 4* and 5* star segment over 20%. Because of that we anticipate a stable increase in the average room rates (ADR) for 2018, and therefore a significant increase in RevPAR.

Compared to other European cities, Vienna is on the 8thplace regarding the overnight stays, just behind Prague and ahead of cities such as Munich or Amsterdam. Vienna is one of the leading congress cities, with its Vienna International Airport which serves as a hub and offers flights to 200 destinations all over the world.

Vienna was ranked in the latest Mercer study for the 9th time in a row number 1 in terms of quality of life, the economic landscape being characterized by stable, positive developments.

HOTEL CONCEPTS

The segmentation and specialization of the existing brands as well as the emergence of new ones follow a positive trend, and examples such as MAXX by Steigenberger, Vienna House R.evo, Marriott Delta, Hilton Canopy are worth to be mentioned.

In addition, hybrid concepts emerge from serviced Residential/Student Living/Hotel concepts, which have already proved their suitability as an investment product for German pension funds or insurance companies starting at a certain size – such as the Smartments Business.

Particularly in the hostel and budget areas exciting new concepts are emerging, as some of these concepts have successfully become targets for international financial investors due to their returns and their scalability.

At the same time, there is a trend towards smaller boutique hotels in the upper segment.These are often operated directly by the owner or by international operators who have created a special product for smaller hotel properties.A distinction is usually made here by the excellent location and/or exciting new gastronomy concepts.

HOTEL INVESTMENT PROPERTIES

With an investment volume of alomost 500 million Euro, 2017 was a very exciting year for the hotel market in Austria. A large part of the volume in Vienna concerned mixed-use real estate, whilst office use stood in the foreground – such as the Roomz in the Austria Campus, the Melia in the DC Tower or the Harry`s Home in the Millenium Tower.

Notable transactions in Vienna were Park Inn by Radisson Uno City, Courtyard Schönbrunn Palace as well as smaller properties such as Amadeus, The Hotel 1060 or Karolinenhof and Gartenhotel Altmannsdorf, both of which will no longer be used as hotels.

In Graz, the Roomz and the Ramada Graz Airport had an ownership change, as well as the Courtyard by Marriott in Linz.

On the demand side, there is still a great interest coming from international investors. Nevertheless, the low initial yields have an impact on the contract structure and on the operator’s demands, which might influence the future exit scenario. 

DEVELOPMENTS

In 2018, the niu Franz, roomz and ibis Styles Prater Messe will be the first to complete new 3* hotels with around 1,000 beds in the 2ndand 20thdistricts in Vienna.

By 2019 and 2020, several hotels in the 4* and 5* segments will enter the market in inner-city locations and/or central traffic areas.

OUTLOOK

We anticipate an excellent tourism year 2018 due to the positive trend of the key macroeconomic fundamentals. In the hotel sector, exciting new brands and concepts will be introduced, and this will result in an interesting pipeline with an increasing number of forward-purchase deals. At the same time, due to the positive development of the tourism key indicators as well as of the related profit figures, the commercialization of smaller hotel properties in the upscale segment will increase.

Besides that, we notice for the first time an increasing international demand for holiday hotels outside major cities, seen as investment products.