2018 hotel forecasts: increasing demand, limited supply growth

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Despite security and safety concerns, a record-breaking number of tourists visited Europe in 2016. Similarly, corporate travel spend is ramping up; the Global Business Travel Association predicts global business travel spend to advance 5.8 percent on average over the next five years reaching $1.6 trillion in 2020. The increasing demand, along with limited supply growth, means hotel markets are booming.

To help you prepare next year's budget, it's time to look at the 2018 hotel forecasts and analyst estimates for the coming months. The raise on hotel costs will greatly impact your travel budget and you will want to be prepared. If you are a Hotelzon user, it’s worth running your own customized reports from your dashboard, and benchmark your data against these trends and forecasts.

2018 hotel forecast: Which cities will be the most expensive?

In 2016, the Average Daily Rate (ADR) in Europe rose 1.5% to 111.77€ with Geneva, Zurich and Paris at the top of the ADR rankings. These same three cities are projected to top the rank also in 2017 and 2018. In Switzerland, the cost of a hotel room may not increase, however, in the rest of Europe room rates will raise a few euros. Paris (229€), London (164€), Rome (148.2€), Barcelona (141.6€), Dublin (138.1€), Milan (137.9€), Amsterdam (137.5€) and Frankfurt (127.4€) all have ADR forecast above 120€ in 2017 and 2018.

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2018 hotel forecast:  Supply outlook

Due to the continuous high demand verses room growth, availability will continue to be a problem cross Europe. And, this will only continue as hotels see increased demand not just from Europe, but also further afield. Not only that. The stronger growth and employment within the peripheral Eurozone economies (Spain, Greece, Portugal, Ireland) will also provide a boost to international business travel spend.

While stronger economies have been pushing the demand, the average annual increase of hotel supply has been just 1% over the past decade. Demand growth has clearly outstripped supply across the continent. Therefore, almost all European capitals are expected to see Revenue per Available Room (RevPAR) growth at the end of this year and 2018.

Despite the limited supply growth, some cities have a good number of new hotel rooms in the pipeline. Berlin expects to add about 3,700 hotel rooms within the next two years, and London is set to open 8,000 new rooms by the end of 2017 alone. Budapest is quickly becoming a hotspot with an additional 2,600 rooms to open across 2017 and 2018.

2018 hotel forecast: Which cities will be the fullest city?

Barcelona is on the rise. Driven by events like the Mobile World Congress, which welcomes over 100,000 attendees, Barcelona will become the third European city with the highest occupancy rate reaching 77.9% by 2018. As it happened in 2016, Dublin (83%) and London (82%) will top the occupancy rankings in Europe in 2017 and 2018.

Occupancy rankings will continue to increase in 2018 across Europe with 15 cities hitting over the 70% mark. Conferences and events continue to drive corporate travel demand, so booking early continues to be a requirement to secure convenient accommodation to the hottest happenings.

This report was brought to you by Travelport Hotelzon with insights by PwC Global.

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