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How fashionable has Italian hotel performance been of late?

Hotel Booking Milans fashion week came to an end last month, with Tom Ford presenting his last show for the fashion house Gucci, signifying an end of an era in fashion. Whilst this era may be over, a new era is starting to emerge in terms of the relationship between the fashion and hotel industries. Next month sees the opening of the Bulgari hotel in Milan. Cerruti and Armani branded hotels are also planned and it is seems likely that both will chose to operate properties in Italy. So with this in mind how has the Italian hotel market fared over the past 14 months?

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Travel Agency A retrospective view

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Cheap Hotel Like many of its European counter-parts Italys economy struggled in 2003. Gross domestic product (GDP) increased by just 0.4 percent during the year, the lowest rate for ten years. High inflation in relation to other euro-zone countries, divisions within the coalition government as well as mounting opposition from the trade unions over the governments social reform programme have all compounded the countrys economic situation. Whilst other European markets have seen consumer and business confidence start to pick up over recent months, confidence levels in Italy remain low in comparison. Overall the Economist Intelligence Unit (EIU) has forecast that GDP will increase by 1.2 percent in 2004, this compares to 1.9 percent for the euro-zone.

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Flight Booking Last seasons performance

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Travel Agent According to Federalberghi, the Italian Hotel Federation, 2002 was the first time for four years that hoteliers had experienced a decline in the number of overnight stays. This trend continued in 2003 with the number of overnight stays falling by a further 1.5 percent on the prior year.

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Hotel Chicago Cultural and art destinations suffered the greatest decline in overnight stays during 2003. In comparison with mountain, lake, seaside and spa locations, cultural and art destinations saw the number of overnight stays fall by 4.8 percent compared to 2002. Cities particularly affected included Venice, Florence and Rome. Results from the HotelBenchmark Survey by Deloitte, which tracks the performance of 22 markets across Italy shows that these cities experienced greater declines in revenue per available room (revPAR) than cities with less reliance on cultural tourism, such as Bologna, Milan and Turin.

Online Booking Despite the declines in revPAR, Venice, Florence and Rome still managed to achieve some of the highest revPARs of any market in 2003. Of the 320 markets tracked globally, all ranked within the top ten, with Venice taking first place.

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Hotel Reservation Although revPAR performance for February (illustrated in the table below) shows only a marginal improvement in some cities, anecdotal evidence from local hoteliers suggests that the coming months look promising. Improved economic performance in key demand generating markets as well as some improvement in Italys domestic market is expected to help improve future hotel performance.

London Hotel Booking To compensate for the decline in the number of high-spending American and Japanese visitors over recent years, Italy is turning its attention to new markets such as China. The Italian Hotel Federation is aiming to achieve Authorised Destination Status (ADS) which will enable Chinese visitors to travel more easily to Italy and hopefully improve visitor numbers to the country.

Discount Travel Recent supply changes

Orlando Hotel During 2003, three new hotels opened in Milan, The Gray, Park Hyatt and The Enterprise Hotel. Future additions include the Bulgari hotel, a Framon hotel and an UNA at Malpensa airport. These are all scheduled to open in 2004.

Booking Agency Four new hotels opened in Rome during 2003, the Boscolo Aleph, Boscolo Exedra, Mercure Roma Piazza Bologna and Novotel Rome La Rustica. Marriott International is planning to open two new hotels in the city in 2004, the Marriott Courtyard Rome Airport and the Rome Marriott Park Hotel. Other new openings planned include a Gran Melia and an Una hotel both scheduled to open in 2005, whilst Movenpick is planning to open a new hotel in the city in 2006.

International Travel Medical The number of new hotel openings in Venice and Florence were limited in 2003. Venice saw the opening of the Hotel Manin whilst Florence saw the opening of the UNA Vittoria and the re-opening of the Continentale. Hilton plans to open its first hotel in Venice in the first quarter of 2006.

New York Hotel In summary, despite the revPAR declines seen over the past 14-months, markets such as Venice, Rome, Florence and Milan still manage to achieve some of the highest revPARs in the world. Clearly there are exciting times ahead for the Italian hotel market, particularly given the entry of fashion brands such as Bulgari and Armani to the market. Despite domestic economic challenges, in particular low consumer confidence, the future for the Italian hotel market looks promising. The start of the recovery within key demand generating markets as well as the opportunities presented by markets such as China should all help improve hotel performance.

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