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London and Paris drop rates
Europe's chain hotels have reported "double-digit" falls in profit in January year-on-year, according to the latest HotStats survey by TRI Hospitality Consulting.
The survey of ten major European cities has revealed a continuing downward trend in both income before fixed charge (IBFC) and occupancy, with demand from source markets in decline.
Both London and Paris dropped average room rates by 8.4% and 3.7% taking IBFC down to €55.19 and €55.13 respectively, knocking the UK capital off the top spot as the most profitable city in Europe.
Vienna saw the most drastic decline in profit with IBFC down 65% to just €9.80 per room year-on-year.
Profits in Prague were hit by the second largest drop of 52.1% to €17.38 per room. Budapest was still the least profitable city with IBFC at €8.17 per room.
Jonathan Langston, TRI's managing director, blamed the "considerable supply growth" in Vienna and Prague in 2008 and falling demand from recessionary markets such as Germany, the UK and the US.
"More than 2,000 extra graded bedrooms entered the Vienna market and at least 800 branded hotel rooms opened in Prague," said Mr Langston. "The growing number of bedrooms is diluting performance."
TRI said Austria's traditionally high labour costs had pushed profitability "further into the red" with payroll up 8.3 percentage points to 55.5% of total revenue.
Only Hamburg reported a relatively low drop in IBFC of 3.7%, while Paris and London saw the second and third smallest declines of 20.6% and 21.5% respectively.
Occupancy in Paris and London fell to 69.3% and 70% respectively, while profits were down 20.6% and 21.5%.