Hotel Operator Beat 2023 - Europe

Summary

Findings from the Cushman and Wakefield Operator Beat 2023 indicate that capital cities throughout Europe continue to hold their allure for operators, with the recent addition of Vienna to this esteemed list. Notably, City markets in France, Germany, Benelux, and Turkey have experienced a surge in operator interest since 2021. However, it is in the coastal and island markets of southern Europe where the most substantial increase in ratings can be seen, as an impressive 85% of operators express optimism regarding resort properties in the forthcoming year. Regarding contractual trends, over 50% of the operators surveyed now place considerable emphasis on ESG KPI reporting and the inclusion of a pandemic clause. Furthermore, there is a noticeable shift towards hybrid leases, accompanied by a decline in fixed leases. Challenges persist within the hotel pipeline, driven by escalating development costs and debt financing difficulties, culminating in an average delay of 6-12 months for projects. Lastly, the growing significance of ESG in the industry is evident, with nearly 60% of operators that would consider offering higher rents and a substantial portion ready to make other concessions in fees and key money for properties with the highest environmental certifications.

Key Highlights

The results of our 2023 Operator Beat sentiment survey across Europe underlined key trends for the hotel industry:

Major European Cities Continue to Hold Their Allure

City markets in France, Germany, Benelux, and Turkey have experienced a surge in operator interest since 2021. Capital cities throughout Europe continue to hold their allure for operators, remaining on the top of the attractiveness list. Meanwhile, second-tier cities gained the most substantial increase in attractiveness relative to 2021, with the most significant improvements observed in Ghent (+46%) and Charleroi (+23%) in Belgium, Cannes (+27%) in France, Leipzig (+26%) and Dresden (+23%) in Germany, and Erzurum (+25%) and Denizli (+23%) in Turkey.

Promising Outlook for Resorts and Luxury Hotels

In terms of resorts, an impressive 85% of operators expressed optimism regarding these properties in the forthcoming year. Accordingly, it is not surprising that the leisure destinations in southern Europe showed a substantial increase in attractiveness for operators, with the coastal areas and islands of Italy, France, Turkey, and Greece leading the way.

Operators also have a positive outlook for the high-end hotel class, with 85% of respondents being optimistic or very optimistic about the performance of luxury hotels​, while 84% are optimistic or very optimistic about the performance of Upper Upscale hotels.

Financial Impact of ESG on Commercial Terms

The growing significance of ESG in the industry is evident. In terms of management and franchise operating structure, a substantial portion of operators seem to be open to making concessions in fees, offering more key money, and waiving technical development services fees for properties with the highest environmental certifications. For lease structures, nearly 60% of operators would consider offering higher rents. This trend increased significantly relative to 2021.

Leading Contractual Trends

In addition to the ESG KPIs reporting clause, over half of the surveyed operators report an increasing trend of the Pandemic Clause in their new contracts. Other growing trends are key money provisions and operating guarantees. 

Hybrid Leases on the Rise

There is a noticeable shift towards hybrid leases, accompanied by a decline in fixed leases. Overall, the survey confirmed a stronger presence of lease structures in Italy, the DACH region, the Iberian Peninsula, and the BENELUX region, while SEE and Turkey are more lenient towards management agreements.

Obstacles in the Hotel Development Pipeline

Challenges persist within the hotel pipeline, underpinned by escalating development costs and debt financing difficulties, culminating in an average delay of 6-12 months. Approximately 16% of projects are reported to be delayed while 8% is estimated to be on hold. The most delays are in France and Iberia, while Benelux and CEE are experiencing the highest share of projects being on hold. 

It is encouraging to see the focus on sustainability among operators, increasingly willing to support hotel owners investing in ESG by offering better commercial terms in their management and lease contracts. All stakeholders in our sector need to work together to make the hospitality industry more sustainable. From this perspective, it is also good to see the increased interest in the second-tier and third-tier cities that should help to bring employment to the regional areas and spread the concentration of tourism from the major gateway cities and few key resort destinations. Bořivoj Vokřínek, Partner, Strategic Advisory, Head of Hospitality Research EMEA, Cushman & Wakefield

About the report - The Operator Beat surveys were conducted among about 200 senior executives of leading hotel operators active in Europe. The surveys were conducted in 2023 across nine different markets: the Iberian Peninsula, the UK & Ireland, France, Benelux, Italy, DACH, CEE, SEE, and Turkey.

Borivoj Vokrinek
Strategic Advisory & Head of Hospitality Research EMEA
Cushman & Wakefield