City Review: Helsinki

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1 City Review: Helsinki April 2011 Credits - David Lake Photography. The Lowry Centre, Manchester Central, Roomzzz aparthotel, Marketing Manchester Credits: Visit Helsinki, Matti Tirri, Commo Image,, Klaus K Hotel, Ultivista OY.

2 According to the latest city review, which was jointly produced by and STR Global, Helsinki hotels showed a 10.7% rise in RevPAR in January 2011, compared with the same period in Demand volume in the second half of 2010 increased but growth in average rates stalled. Helsinki, the capital of Finland, is a compact, yet dynamic city at the geographical and cultural crossroads between East and West. The city has a population of approximately 600,000 (1.3 million in the wider Helsinki metropolitan area). Helsinki repeatedly features in lists of the world s most livable cities (including The Economist's World's Most Livable Cities 2011 in which it earned 6 th place and Monocle's Most Livable Cities Index 2010, where it featured in 5th place). With its diverse economy, Helsinki has become a leading business hub at the heart of the Baltic Region. Helsinki is the key tourist destination in Finland, with approximately 1.8 million visitor arrivals in The city attracts a healthy mix of business and leisure visitors and benefits from excellent infrastructure and air transport links. Helsinki Airport the busiest Finnish airport recorded approximately 12.9 million passengers in 2010, up from 12.6 million in Helsinki s key tourist attractions include world class museums (Ateneum, Kiasma and the National Museum), churches, architecture, leisure parks (Linnanmäki, Sealife), Suomenlinna fortress and the surrounding archipelago. Helsinki is a popular destination for international events, conferences and exhibitions due to its ease of access and the safe environment it offers. Trends in Hotel Market Performance The Helsinki hotel market is largely fuelled by business demand, which decreased significantly in late-2008 and in Despite experiencing a considerable downturn during the global economic crisis, the Finnish economy and demand for hotel accommodation in Helsinki recovered faster than expected by the economists and hotel experts. The recovery in Helsinki s hotel market was also more rapid than that of many other European cities. According to data provided by STR Global, Helsinki hotels recorded an overall decrease in RevPAR performance of 17.0% in 2009 compared to After a difficult first month in 2010, demand volume for hotel accommodation in Helsinki showed quite promising growth from February onwards a positive trend in line with the increase in passenger arrivals at Helsinki Airport. Year-end 2010 RevPAR figures for Helsinki showed a 5.0% increase, compared with 2009, driven by a strong recovery in domestic business and leisure demand.

3 STR Global Trend Report - Helsinki Hotels Full Year 2009 vs. Full Year 2010 ( ) 85 Monthly Occupancy and ARR % RevPAR Variance % % Occupancy % ARR 5% 0% -5% % % 45 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 50-20% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Occ 2009 Occ 2010 ARR 2009 ARR Variance Occ % ARR RevPAR Occ % ARR RevPAR Occ pts^ ARR % RevPAR % Full Year % 5.0% Note: the above graphs and table are based on monthly and daily data received by STR Global for a sample of 48 hotels as in January The variance in occupancy (^) is expressed in percentage points. COPYRIGHT DISCLOSURE STR Global Limited. The following table illustrates the January 2011 results as provided by STR Global. Recovery in demand levels since February 2010 has been strong, but average rates have suffered from general rate resistance and more specifically from lack of international events during the key months. Although average rates are lagging behind the levels recorded during the boom years 2007 and 2008, the rate performance is not too far off the longer term rate average for Helsinki. STR Global Trend Report - Helsinki Hotels Jan 2011 vs. Jan 2010 ( ) Variance Occ % ARR RevPAR Occ % ARR RevPAR Occ pts^ ARR % RevPAR % Jan % 10.7% Note: the above table is based on monthly and daily data received by STR Global for a sample of 48 hotels. The variance in occupancy (^) is expressed in percentage points. COPYRIGHT DISCLOSURE STR Global Limited. Trends in Hotel Supply According to Statistics Finland, the hotel market in Helsinki consisted of 53 hotels and represented c. 8,300 rooms in A sign of the resilience of the hotel market was the strong occupancy performance recorded last year, despite the increase in supply. New hotel openings in 2010 included: the 152-room mid-market Cumulus Hakaniemi; the 58-room Hotel Fabian, which has found a niche in the lifestyle segment; and the 82-room limited-service Omenahotelli. We are aware of a number of sites in the Helsinki metropolitan area which are earmarked for hotel development. However, as a result of the challenging trading conditions which are now visibly easing and lack of domestic funding, the short-term hotel pipeline in Helsinki remains limited. As most of the existing hotels in the area operate in the mid-market segment, significant

4 opportunities at both ends of the quality spectrum remain unexplored. In late-2010 and early this year, interest from international hotel operators towards the limited service market in Greater Helsinki has been notable. A couple of excellent locations in the city centre are also being considered for a full-service property, which could be operated under an international brand name. Providing further evidence of a recovery in the hotel market, helped to agree the long-awaited Marriott West End project near Nokia HQ, where construction is expected to start later this year. The hotel will have 275 guest rooms and become the first hotel operating under the Marriott flag in Finland. Another confirmed new scheme is located in Helsinki s Hakaniemi, where the 170-room Scandic Paasi (a project that was acquired from Next Hotels) is expected to start trading from October The hotel is located adjacent to Helsinki's Paasitorni Congress Centre an historic meeting venue which has been completely refurbished. Although the economic slowdown has temporarily halted some hotel projects, the hotel components of larger redevelopment schemes, such as Jätkänsaari in west-helsinki and Kalasatama in the east, are at least rumoured to materialise as planned. Ms Katrilena Eklöf, the Head of Helsinki Tourism Bureau Visit Helsinki, is very pleased to announce that the Helsinki hotel market reached the highest bed occupancy ever recorded in The hotel market has been geared towards business travel which, until recently, represented the majority of the demand. However, the growth in domestic leisure segments last year was strong, and leisure travellers now represent over 50% of the total overnight stays in the Capital. The domestic demand has helped to counterbalance any economic fluctuations affecting hotel demand volume, a trend that has been noticed in other Nordic Capitals too. We are delighted that Finnish travellers are visiting Helsinki more, says Katrilena Eklöf. She believes that Helsinki s wide range of events, culture and shopping opportunities will continue to attract Finns. Lower accommodation prices also helped to attract domestic visitors in 2010, she adds. As the majority of the existing hotel supply in Helsinki is of mid-market standard, there are definitely opportunities in the limited service sector for new hotel products catering for the price-conscious traveller. According to Visit Helsinki, tourism is expected to grow again by around 4% in The World Design Capital Helsinki 2012 theme year is expected to stimulate more interest in the city in the coming years and to have an overall positive impact on tourism in the greater Helsinki region.

5 Trends in Hotel Transactions By far the largest hotel transaction in the Nordic region was the sale of the Norgani Hotels portfolio (comprising 73 hotels with 12,900 rooms and one conference centre) to Pandox AB in August Of these, 15 hotels and the conference centre are located in Finland; eight of them are in the Helsinki Metropolitan area. CapMan Hotels purchased the building adjacent to the existing hotel Linna in 2010 to accommodate a new bedroom extension. Once the expansion is completed, the hotel will triple its capacity to 160 rooms. Outlook As the trading conditions continue to improve, Helsinki shows further potential for growth. The city remains Finland s key economic hub and is an important centre for trade and tourism in the region. The city s hotel performance is expected to continue recovering during There are two main drivers for this expected recovery in demand. Firstly, improved access to and from Helsinki is expected to boost the local economy and also to increase international visitation. Large infrastructure projects, such as the new high-speed Allegro train connection between St. Petersburg and Helsinki, are expected to bring significant growth in visitor numbers. The national carrier Finnair is aiming to make Helsinki the international transit hub for its Asian routes and this, together with a strong high tech business presence in the Helsinki Metropolitan area is reinforcing Finland s competitiveness globally. Secondly, leisure demand has traditionally helped to boost weekend and holiday season occupancies in the Helsinki region, but hotels have also registered an increase in mid-week leisure demand. With apparent demographic changes (the population is aging and becoming wealthier) and improved leisure product promotion, this segment is seen to have significant potential for further growth.

6 For further information please contact: Riikka Moreau Consultant Direct line: +358 (0) riikka.moreau@christie.com Konstanze Auernheimer Director of Marketing & Analysis STR Global Direct line: +44 (0) kauernheimer@strglobal.com Kimmo Virtanen Director Direct line: +358 (0) kimmo.virtanen@christie.com Peter Fermoy Head of Media Relations Direct line: +44 (0) peter.fermoy@christie.com Andreas Scriven Director & Head of Consultancy Direct line: +44 (0) andreas.scriven@christie.com Notes to Editors uses desk-based research and experienced local industry specialists to produce bi-monthly city reviews. Hotel trading data is provided by STR Global. Founded in 1935, is the leading firm of surveyors, valuers, consultants and agents specialising in the hospitality, leisure, retail and care sectors. Currently employing close to 350 professional and specialist staff, it has 15 offices throughout the UK with valuation, agency, investment and consultancy teams focused on its key sectors. s international operations are based in Barcelona, Berlin, Dubai, Frankfurt, Helsinki, Lyon, Marseilles, Munich, Paris, Rennes and Vienna. STR Global provides clients including hotel operators, developers, financiers and analysts access to hotel research with regular and custom reports covering over 40,000 hotels. STR Global provides a single source of global hotel performance data, offering concise, accurate and thorough industry research worldwide. This report contains proprietary information of STR Global Limited, and no part of such data may be reproduced or transmitted, in any form or by any means without the express written consent of STR Global Limited. All requests to reproduce this information must be addressed to info@strglobal.com. Any approved reproduction of data within this report, in whole or part, must be attributed with an accompanying notice of copyright to 'STR Global Limited. Failure to comply with the preceding guides may result in legal action. Whilst every effort has been made to ensure the accuracy of the data contained in this report, this cannot be guaranteed and neither STR Global Limited nor any related entity shall have any liability to any person or entity that relies on the information contained in this report. Any such reliance is solely at the user's risk. Copyright laws apply.