DACH Region Hotel & Chains Report 2023
By Horwath HTL on October 1, 2023
A very warm welcome to the 2023 DACH Region Hotels and Chains Report.
The three countries that make up the region, Germany, Austria and Switzerland are a perfect microcosm to examine the wider industry as a whole. The issues on display in these markets, perfectly represent the hospitality industry in its post-Covid phase.
The industry itself is a series of contradictions, a classic, ‘good news-bad news’ situation although the fact that there is good news at all, is to be celebrated. On the positive side, incredibly strong demand has pushed most markets beyond 2019 highs and has allowed the industry to increase average rates to a level beyond the wildest dreams of most owners. Fears that 2023 would slow down as cost-of-living pressures increased have been overblown, and many markets posted record results. Even extraordinary temperatures, wildfires and flooding have not damped traveller enthusiasm. This has allowed the industry to generate much needed cashflow and mitigate some of the negative pressures, of which there are many.
Just as the hospitality industry was in full recovery from the pandemic, wider global issues have caused significant headwinds for the business. Inflationary measures, always possible in an interconnected world chasing the same goods post COVID, has been supercharged by the invasion of Ukraine. Double-digit inflation figures, combined with energy shocks and the problems sourcing staff, has created unprecedented pressure on hotel operating balance sheets. At the same time, Central Bank actions to curb inflation through the raising of interest rates, has sent shockwaves through developers and banks as the numbers no longer work, and projects cease to be viable. As a result, transaction numbers are at the lowest point for a decade as the gap between buyers and sellers’ expectation, prove too hard to bridge.
As interest rates remain high, we expect that the industry will need to be more creative to finance their projects, expect an influx of companies and funds new to the industry bridging the gap, albeit at eye-watering rates. Developers are also fully diversified into what used to be called alternative accommodation but is just another operational real estate investment which is fast becoming a significant asset class. The industry itself continues to wrestle with issues of ESG, probably the most significant challenge that we will face in our lifetime, one that has very far to go to being understood by the industry.
Finally, the data here shows that despite all that, confidence in the industry remains high and will continue. Development pipelines are larger than they ever have been, as is demand for travel. As long as these continue to be strong, the industry will continue to develop.