European tour operators are sending their customers on long-haul holidays or becoming increasingly nimble in booking European properties this summer as growing hotel prices continue to bite in 2024.
While establishing the exact nature of the prices increases across Europe is difficult, individual financial reports and results for some the region’s biggest hoteliers show that revenues and rates are on the up.
IHG Hotel and Resorts' half year results for the period ending 30 June, 2024, show that total revenue grew by 4 per cent to $2.34 billion.
The EMEAA region was the key driver in this with the largest RevPAR growth, 7.5 per cent for the period while room occupancy grew by 2.5 per cent while rates were 3.5% higher.
This growth comes following a strong 2023, when Intercontinental recorded a total revenue growth of 19% to $4.62 billion.
While Greater China might have been the key driver of this growth with RevPAR increasing by 71.7%, the EMEAA region saw an increase of 23.7 per cent in RevPAR.
This EMEAA growth was achieved with an occupancy level of 70.4%, an increase of 7.9 percentage points, while rates were 9.8% higher year on year.
Meanwhile, Accor also reported a strong 2023 having broken the €1 billion mark for its EBITDA for the first time, having recorded revenue of €5.06 billion – up 20%.
The ENA region saw an increase in RevPAR of 8 per cent in the fourth quarter, and while this was less than the increases seen in Africa, the Middle East and Asia Pacific, it continues a trend for growth that left the hotel group in a bullish mood for 2024.
Speaking when the results were published, Sébastien Bazin, chairman and CEO of Accor, said: “While the geopolitical backdrop remains complex, 2024 is set to be rich in major international events which should continue to fuel growth and we start this new year with confidence.”
Tom Jenkins, the CEO of the European Tourism Association, said that European hotel prices have grown by a compound rate of 15-20 per cent since 2022 when the world opened up again in the wake of the Covid pandemic.
And he blames the price rises on the ongoing hangover from the global lockdowns which impacted the North American market particularly hard.
Jenkins said: “America in 2020 was going to be a record year and obviously it turned into a non year
“The fact that they had to cancel - they didn’t get any refunds, they got credits - meant the rebound which was going to occur happened with added force.
“Everybody rebounded with their tour credits plus you have all the built up demand over the two years they couldn’t come.”
Western Europe has remained popular with the North American market since 2022, despite the recent Paris Olympics discouraging some travellers from visiting Europe, and this has kept pricing high.
However, Jenkins added American visitor numbers are now levelling off thanks to satiated demand while increasing hotel prices are now beginning to act as a deterrent.
Neil Sealy, the UK and Ireland managing director of the Barcelona-based Exoticca, said he has seen double digit growth in European hotel prices since the pandemic with the trend being pronounced in the luxury sector.
This has led to high pricing across the European sector which, combined with high flight prices in summer 2024, has led many customers questioning the costs of a traditional break in the Mediterranean.
Sealy said: “The combined effect of this is people are looking at their traditional European holiday destinations for their families in the summer, and then perhaps having a quick look at Asian destinations like Thailand and the Maldives.
“And they are noticing that for the same sort of money, or maybe not a lot more anyway, they can actually go to one of these more exotic far-flung destinations, which gives them the perception that they're actually getting better value for their money.”
He said this trend is also being reported by the travel agents he works with, adding: “They're getting more and more people who are switching from their traditional Mediterranean holidays to long haul because they're finding it relatively affordable or, perhaps the other way, the Mediterranean is becoming unaffordable.”
He added even if the cost of a European package comes down in 2025, he believes consumers might be slow to return having experienced a long-haul summer holiday.
Noel Josephides, the chairman of the Sunvil Holiday Group, argued that while prices, which he has seen grow by up to 15%, may be putting off consumers, European hoteliers need to work more effectively with tour operators in order to drive business.
He added: “Hotels are getting reluctant to give allocation prices, let alone allocations, as they make their pricing dynamic.”
This makes it hard for operators to give customers accurate quotes months in advance of their holidays and has led to Sunvil sales dropping by about 10% this year.
While Josephides accepted that hoteliers are trying to drive bookings direct, as opposed to via third parties like booking.com, he argued they need to maintain good relationships with operators whose expertise is being called upon by consumers as their holiday habits change.
He said: “Increasingly, we are doing complicated tailor-made itineraries which used to be a small part of what we do but which now accounts for about 65% of our business.”
Josephides added while hotels have been guilty of putting their prices up in the wake of the pandemic, villa owners have also succumbed to the same temptation and saturated the market with ever-pricier self-catering accommodation.
And he argued with up to a million such properties rumoured to exist in Greece alone, any collapse in the demand for accommodation is likely to strike there first.
He said: “There’s a lot of overpriced stuff out there and if you’ve got a villa in a good position, then you’ll sell it a good price but if it’s a standard villa and pool in an average position then no, it won’t sell.
“A lot more villas and these small properties have come onto the market because everyone’s jumped on the bandwagon and they’ve been having a lot more empties this year so it hasn’t been so successful.”
Josephides said this is already leading to static or reduced pricing in the villa market for 2025.
However, whether Europe’s hoteliers match this remains to be seen, but with consumers calling for better value and operators hoping for better working relationships, now is the time for hoteliers to revisit their business models for 2025 or risk losing customers to the long-haul market for good.