European hotels have improved steadily in 2005 but are still performing weakly compared with the rest of the world, according to the latest Deloitte HotelBenchmark report.
Revenue per available room (revPAR) went up by 3.6% making Europe the world's “slowest growing region.”
The region's trading performance has still not returned to its pre-2000 levels.
In the first nine months of the year, the average occupancy was 67.4%, the room rate 103 and revPAR 69.
Hotels in the 10 countries which joined the EU in 2004 had an occupancy rate of 70% and while revPAR was only 54, this was a 10.6% increase on 2004.
Central and Eastern Europe, the region where most of the new EU members come, enjoyed a revPAR rise of 11.9%.
Average room rates in this region are now just 7 below those in the traditionally more expensive Western Europe while revPAR rates are slightly higher
Deloitte reported that the best performing region was the Eastern Mediterranean - Cyprus, Turkey and Israel - where revPAR grew by a “staggering” 29.5% with similar rises in occupancy levels and room rates.
The worst performing area was Southern Europe - Italy, Spain, Portugal and Greece - where revPAR fell by 1.5% despite a 2.2% increase in occupancy.
Both Spain (1.4%) and Italy (2%) saw a drop in room rates.
Barcelona and Madrid both saw their room rates fall because of oversupply and with new openings planned, Deloitte forecasts the markets there will remain tough.
In Western Europe, Germany which had a 4.7% rise in revPAR in 2004, saw it drop by double digits in March and May.
The cause was the biennial nature of major fairs which are crucial to the German hotel industry.
Berlin was another city to see a fall in its revPAR, again because of oversupply with four major new properties opening this year.
The best performing area was Northern Europe - the UK and the Nordic countries. Driven mainly by the UK market, occupancy was 72% and average room rates were up 6.8%
Helsinki, Oslo, Copenhagen and Reykjavik all saw an average room rate growth of 9%.
The report concluded: “Short-term prospects for the hotel industry across Europe look sound. While the euro-US dollar exchange rate and modest GDP expectations mean revPAR growth will be steady rather than substantial, we expect to see the East-West divide continue.
“Many of the former Eastern bloc countries will continue to deliver above average revPAR growth - in many cases double-digit - but this will be in sharp contrast to their Western European neighbours, where the future looks more subdued.”
* The full report will be published on November 22