Hotels, luxury wins (and the Airbnb model)

21 May, Corriere della Sera

The unanimous opinion of the Italian hospitality sector is that it lacks medium-range hotels to best meet the tourists’ necessities. Despite this, the big investments by the hospitality groups concern five-star hotels. The preliminary figures of the reports on the global hospitality real estate sector published by World Capital in occasion of the recent conference of Federalberghi help explaining this apparent contradiction. Inflation-adjusted, only five-star hotels at the end of 2017 provide revenue for each room equal (and even slightly higher: +0,8%) to the one reported at the eve of the passage from lira to euro. While 14.8% of the four-star hotels registered a negative performance, this value drops to -24.3% for three-star hotels.

The factors

According to L’Economia of Corriere della Sera, three factors explain this trend. The first one is that the occupancy rate in Italy grew in 2017, the best year since 2002, but this rate is still lower by 1.56% than the rate registered in 2000. The drop in sales of rooms has decreased in the last few years has mainly concerned medium- and low-end hotels. The second factor is that nowadays hotels no longer pay commissions to travel agencies, replaced by online portals, but such commissions weight even more on the budget. The third reason is the wild growth of short-term rentals. Hotel managers have no doubt when pointing out their biggest enemy: Airbnb. It’s unlikely, however, that the typical guests of five-star hotels would be attracted by the idea of spending their holidays in an apartment rather than in a hotel with high-level services. Despite this scenario, the real estate value of hotels has grown by 8.4% in the last decade, partly because the number of facilities has increased, partly because the value of the properties has been stable, as the hotel revenues have been stable thanks to restaurants (a determining element in five-star hotels).

For what concerns the investment strategies, the operators of the sector would start a new business in a tourist destination (38% of the people surveyed) and only 9% bet on the four cities leading the market: Milan, Rome, Florence and Venice.

The names

Whereas for financial investors, the four capitals of Italian tourism are the primary target, as they’re preferred by 84% of the operators, with Milan (78%) at the first place. Both hotel managers and investors prefer traditional hotels over aparthotels, bed and breakfast and agritourism. Finally, there is another aspect that might explain the difficulty of selling rooms at a good price: it’s the poor conditions of the properties, According to a survey of hotel managers included in the World Capital analysis, only 27% of the facilities don’t need investing in new furniture and renovation work.

Source: Corriere della Sera

Translator: Cristina Ambrosi

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