Even if Germany does not succeed in winning the World Cup, many Germans would be content with a boost to their economy.
With FIFA expecting one million foreign visitors to come to Germany during the duration of the World Cup, one would expect the German hotel industry to be one of the main direct beneficiaries of the soccer event. With occupancy rates so far no higher than during a usual month of June, many German hoteliers fear, however, that the event may not reap the hoped for rewards.
“There has been no significant increase in reservations” said Alexander Schreiter, General Manager of the Crowne Plaza Hotel in Hamburg. “We will only have a full hotel for two to four nights of the World Cup and since Hamburg is hosting five matches we would have expected to have 100 per cent occupancy for at least eight nights” said Mr. Schreiter.
There appears to be a consensus among most German hoteliers that the demand for hotel accommodation during the event has not risen significantly. Consequently, occupancy rates during the World Cup matches are unlikely to be much higher than during a normal non event period.
Many have put this down to FIFA, who block-booked too many room nights for the tournaments and unable to sell them gave back one million rooms to hotel operators on April 30. “Occupancy looks like it will remain stable during June and we do not expect any increase as FIFA returned more rooms than expected”, confirmed Andre Salim, Resident Manager of Le Meridien Parkhotel Frankfurt. Many argued, nevertheless, that this was to be expected as it frequently happens during large sporting events.
Despite disappointing occupancy rates, average room rates have increased, particularly on match days. According to the FIFA World Cup Accommodation Services, the average price for accommodation during the World Cup is EUR 190. The Art’otel Berlin Mitte has pushed average room rates up to approximately EUR 200 per night. “The short-term benefit of the World Cup will be an increase in average room rates”, said Hans Joachem Thones, Finance Manager of Art’otel Berlin Mitte.
The first four months of 2006 have been positive for German hotel performance, with TRI Hospitality Consulting research showing that revenue per available room, the key hotel industry indicator, increased in Berlin by 10 per cent and in Hamburg by 13.5 per cent, putting them both ahead of London growths in that period. If average room rates remain high, this trend is likely to continue during the month of June. The German National Tourism Board also confirmed that the upward trend in inbound tourism continued in the first quarter of 2006, with figures showing a five per cent rise in the number of overnight stays by international visitors compared with the same period in 2005.
The drawbacks of such an event on the hotel industry should not, however, be downplayed. A report by DIW Berlin, the German Institute for Economic Research, points out that many tourists stay away due to a surge in prices and crowds. A World Cup championship, it says, can also reduce the number of business trips or conferences. “We have noticed that we are losing out in June on conference and corporate tourism on non event days, since hotels are generally more expensive and the city is full”, says Mr. Thones. This situation is particularly acute in cities like Frankfurt and Munich that rely heavily on conference and corporate tourism. Some hotels have nevertheless predicted and overcome this issue. “The month of May was better than expected since some conferences were bought forward from June”, said Oliver Staas, General Manager of Radisson SAS Frankfurt.
Many hotels were built or extended in the twelve cities hosting the football and opened in time for the start of the World Cup. There are mixed opinions on the desirability of this increase in supply. Hoteliers in Berlin fear that after the World Cup is over the German hotel market could be faced with an oversupply of accommodation. “The Berlin hotel market is already over-supplied and average room rates are already being affected”, said Mr. Thones. The Berlin Tourism Board complained that average room rates in the city are already too low and that it is time for the hotel market to concentrate on increasing rates and filling beds. Demand for hotels in Frankfurt and Hamburg, on the other hand, is still growing and therefore they are likely to benefit from the increase in supply. “The more hotels in Frankfurt, the more business for the city”, said Mr. Staas. He believes that after the World Cup the city will attract even more conferences.
“Typically, after a sporting event of this size, increases in occupancy and average room rates return to their normal levels and are not long-lived”, said Jonathan Langston, Managing Director of TRI Hospitality Consulting. Based on research by TRI Hospitality Consulting, most of the UK cities hosting the Euro 1996 football only experienced increased levels of occupancy and a hike in average room rates during the month of the event. Furthermore, following the 1992 Olympics in Barcelona, the city was badly over-supplied for several years.
Calculating the impact of the World Cup on Germany’s hotel industry is not a simple task, since last minute bookings could alter the picture. Germany’s hotel performance for 2006 may improve slightly as a result of the World Cup, but as occupancy rates do not look like they will increase significantly during the event, hotel profits may also see little change. “It seems questionable whether the World Cup will benefit the German hotel industry in the medium to long-term.
Many hoteliers and tourism experts believe that the most important aspect of the World Cup is that it will help to improve the country’s image and put Germany on the map”, said Mr. Langston.
TRI Hospitality Consulting
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