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Impact of COVID-19 on the European hotel market

Ralph van Polanen Petel • 07/04/2020
What's the impact of COVID-19 on the European hotel market?
  • Only 41% of the investors surveyed are still active in the hotel investment market
  • Occupancy rate of Dutch hotels decreased by 84% in two weeks

The latest report provides insight into the impact of the COVID-19 crisis on the European Hotel market in 2020 External Link. The figures show that the sector has made a relatively good start with positive growth in turnover per available room (REVPAR), as a result of the increasing average daily rate (ADR) and despite the slight decrease in occupancy during this period. Since mid-March of this year, the COVID-19 outbreak in Europe has caused capacity utilization to drop at a very rapid pace. In the Netherlands, the occupancy rate fell to 16% in the last two weeks of March with the largest decrease (50%) in week 11 followed by a further 34% decrease in week 12. Although some countries were initially less affected than others (such as the United Kingdom), most hotels - except for a few airport locations - are now closed or minimally occupied throughout Europe.

Cushman & Wakefield indicates that joint solutions are mainly sought between the various stakeholders - such as owners, operators and banks - by means of, for example, deferment of payment, rent reduction or rent deferment, but also, for example, deferment of loan payments or adjusted credit limits. The focus is on temporary solutions to weather this phase of the crisis with the hope of recovery in the second half of the year. Government support will be crucial for this sector throughout Europe, according to the real estate advisor.

Ralph van Polanen Petel, Associate Hospitality Cushman & Wakefield Netherlands: “The stagnation of tourism and international business has an enormous impact on the hotel market. Most of the hotels are empty or only minimally occupied. It is nice to see that very positive initiatives are being taken by owners and operators to provide support in this time of crisis. There are hotels that are completely converted into hospitals, quarantine facilities, shelter for, for example, the homeless or medical staff, but in some places the hotels are also used as temporary logistics space or work locations for people who really cannot work from home. Where possible, you also see that restaurants switch from hotels to home delivery. ”

Cushman & Wakefield notes that despite the lockdown, hotel transactions are still taking place in Europe. According to the advisers, there are wealthy investors who want to take advantage of the opportunities that exist in the hotel investment market right now, for example with restructuring of financing. A tour by Cushman & Wakefield of European hotel investors in the second half of March 2020 showed that 41% of investors are still active with advanced transactions or looking for distressed assets.

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