Since some hotel openings were postponed to 2021 due to the pandemic in 2020, 87 hotels opened in the 9 cities under review last year. This means a 150% increase in hotel openings compared to 2020 and an increase in room supply by 15,500 rooms. Frankfurt is the leader with 18 new openings in 2021 and added almost 4,200 rooms to the hotel market. The overall pipeline over the next three years remains strong, particularly for Hamburg, where room supply is expected to increase by 10% in 2022. Cologne will be the city with the most hotel openings, with 17 hotels and over 3,000 rooms, plus another 11 hotels in 2023 and 2024, increasing current supply by 31% over the next three years. It remains to be seen whether these project developments can actually be opened in the planned period due to cost increases or a shortage of resources.
Hamburg is a renowned congress, trade fair and musical destination and should recover relatively quickly due to the high proportion of domestic tourists. Like the other German cities, Hamburg was still affected by the strict restrictions on the accommodation industry in the first half of 2021, but already had a strong summer in 2021, which peaked in August with 1.3 million overnight stays.
The absence of events, festivals and trade fairs in 2020 led to a significant drop in arrivals and overnight stays in Berlin. However, the numbers in 2021 increased slightly by 13.7% compared to 2020. Both hotel and bed supply have declined at a CAGR of -3.2% since 2017, showing the impact of the past two years on the Berlin hotel market. Nevertheless, the confirmed pipeline includes approximately 11,000 rooms in over 60 projects.
Düsseldorf was hit comparatively hard by the effects of the Covid 19 pandemic. With strict travel bans still in place for the German hotel market until May 2021, ADR and RevPAR performance continued to decline at -10.2% and 7.6%, respectively. Nevertheless, Düsseldorf is an important trade fair destination and hosting Medica with 46,000 visitors, 76% of them from abroad, brought a glimmer of hope for the Düsseldorf hoteliers and for the return of trade fairs and international demand in the future.
Cologne accounted for 2.8 million overnight stays in 2021. The second half of the year was particularly promising, with a 2.5% increase in arrivals and an 8.1% increase in overnight stays compared to 2020. Among the top 9 Of cities in Germany, Cologne has historically shown the most sustainable development in the hotel market, as demand grew faster than supply before the pandemic. The overall high level of demand stability in recent years points to a fairly rapid recovery.
In addition to the well-known top 7 cities, Christie & Co also looked at the high-growth cities of Dresden and Leipzig in Saxony for the first time. The hotel market in Dresden suffered greatly from the corona pandemic: with only 1.1 million overnight stays in 2020 and 2.2 million in 2021, the number of overnight stays has more than halved compared to 4.7 million in 2019. Nevertheless, Dresden is well positioned as a travel destination to recover quickly from the Covid 19 pandemic and its consequences. After the restrictions that lasted until the end of May 2021, the Leipzig tourism industry recovered relatively quickly in summer and even reached a new record in August 2021 with 368,339 overnight stays. A high proportion of domestic tourists will be a key driver for the recovery process. Due to the very heterogeneous demand, a rapid recovery is to be expected.
Frankfurt has seen a steady increase in arrivals and overnight stays in recent years, a trend that unfortunately stopped in 2020. With the pandemic, demand stalled and room nights fell 61% to just 4.1 million in 2020 and 4.2 million in 2021. The return of international business demand will be key to the hotel market recovery.
In 2021, Stuttgart recorded 1.6 million overnight stays, similar to the previous year. Loss of trade show attendees further increased the pressure on KPI performance and both ADR and RevPAR dropped almost another 10% compared to 2020. However, in the second half of 2021, rising overnight stays also showed increasing traveler confidence in the lodging industry. Most of Stuttgart’s demand comes from within Germany, which will help the market to recover.
In the Bavarian capital of Munich, the second half of 2021 saw a first positive sign of the hotel market recovery, reflected in a 3.9 percentage point increase in total occupancy for the full year. The shift in source markets from overseas guests to European guests was evident as the most important source in the first half of 2021 was domestic guests, who accounted for 76% of all overnight stays.
For the first time, Christie & Co also focuses on the emerging trends in the hospitality industry. In addition to the demand on the part of the customer for a digital hotel stay experience and long-stay products or serviced apartments, the trends in the hotel real estate sector are also highlighted. Mixed-used assets are the result of modern urban development that combines living, working, shopping, fitness, gastronomy, leisure and even education. From an investor’s perspective, 24/7 use is not only a worthwhile investment, but also reduces risk. As a result, the focus on mixed-use properties is becoming more and more present. A second trend is real estate conversions, as there is a lack of suitable project development locations. Developers are increasingly looking for properties that can be converted into hotel projects or mixed-use properties. But not only hotel developers are interested in converting office buildings, schools or other objects such as prisons. Project developers are also showing increasing interest in buying hotel properties in order to convert them into retirement homes or residential units.
Now the signs are pointing to recovery again: “Both operators and investors are on a growth course and continue to see the German hotel market as an attractive investment. In the long term, we expect an increasing transaction volume on the German hotel market and new players are also showing interest in hotel assets in Germany,” explains Benjamin Ploppa, Director – Head of Hotels Germany at Christie & Co, explaining the positive outlook. “Nevertheless, it remains to be seen how the recent political events in Ukraine and Russia will develop in the medium to long term. While travel and booking behavior has also changed in past crises, this time the economic consequences will also be felt far beyond the borders of the affected countries. For example, the higher energy costs will also be reflected in price increases in the tourism sector. The German hoteliers have already demonstrated a high degree of flexibility, solidarity and humanity and have shown how to accept and overcome challenges,” concludes Benjamin Ploppa.
The full report can be found here. The report is written in English.
