Berlin Hotel 2014/2015. Berlin. Market Report. Accelerating success.

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1 Market Report Berlin Hotel 2014/2015 Berlin Market Report Accelerating success.

2 Overall information In its role as the German capital, Berlin is home to governmental and administrative institutions and draws international and civil society organizations. At the same time, the city has an extraordinarily dense network of excellent research institutions, both affiliated with academia and outside it. The city has particular appeal as a site for the creative sector, with those involved in cultural and creative endeavors moving to Berlin from Germany and abroad. This is also reflected in the figures for travel and tourism, which show Berlin as the top destination in Europe. The Berlin Strategy Urban Development Concept Berlin 2030 was adopted in November 2014 to serve as guidance for overall urban development for Berlin, defining where action is needed and identifying certain areas for transformation. Among the factors included in the plans are the areas of the economy, education, diversity and accessibility in Berlin Mitte, the City Center West, Stadtspree, Adlershof and the Berlin-Brandenburg airport. Transportation infrastructure The Berlin transportation network is robust and extensive, with S-Bahn and U-Bahn metro rail, buses, trams, and the city s main rail station. Plans to expand the Berlin streetcar network call for four new connections (at the Ostkreuz and main train stations, from Alexanderplatz to Tiergarten and at the Mahlsdorf station). The central bus station, which opened in 1966, is scheduled for modernization starting in 2016, after some delay. The changes will include an additional ten stops. The number of bus trips increased by 75% (as many as 175,000 arrivals and departures in all) in 2014 due to the liberalization of longdistance scheduled traffic starting in early 2013 (which, among other things, eliminated the protection from competition that had been given to long-distance rail service and existing longdistance bus lines) and the elimination of many direct rail connections. Other parts of the transportation infrastructure in Berlin have not reached the same level. The Berlin airport in Schönefeld saw over seven million passengers in 2014, and Tegel Airport handled over 20 million. This marks a new record compared with the year before and makes Berlin the third largest airport site in Germany. In all, 170 destinations in 48 countries are served from Berlin. Over 17 million euros in renovation funding has been set aside to continue to ensure operational safety and reliability in Tegel. There are also plans to expand the airport in Schönefeld, in the southeast of the city. The Supervisory Board of airport operator Flughafen Berlin Brandenburg GmbH currently reports that flight operations are slated to begin in the second half of BERLIN In Numbers Inhabitants 3,422,000 Unemployment rate 11.1 % Employees subject to social insurance requirements Source: Federal Statistical Office, Statistical Offices, Federal Employment Agency Demand 1,269,000 Disposable income per capita 19,796 Source: Federal Statistical Office 2 Market Report 2014/2015 Hotel Colliers International

3 Center of economic and business activity Berlin is not only the political center of Germany, but is also ahead in terms of both job growth and founding of businesses. Over the last few years, Berlin s economic output has grown by an annual average of 2.2%. The city has seen the emergence of a dynamic IT startup scene, which now accounts for a large portion of German venture capital. The industrial sector has stabilized in the last ten years and contributes to job growth. Specific location-based advantages include the city s central geographic location, excellent infrastructure, highly qualified skilled workers and executives, international atmosphere and wealth of cultural and leisure time offerings. The diverse and extensive knowledge landscape is an especially important basis for the local economy, encompassing 15 public and 28 private higher education institutions, 52 university research institutions and 60 that are not affiliated with the universities, and over 171,000 students (17.1% of them international students) during the 2014/15 winter semester (an increase of 3.2%). Berlin is also viewed as the heart of the creative sector and an important hub of the media. The biggest companies in Berlin include Bayer Schering Pharma AG, Deutsche Telekom AG, Deutsche Post AG, Siemens AG, Daimler AG, Deutsche Bahn AG, Berliner Verkehrsbetriebe (BVG), healthcare firm Vivantes Netzwerk für Gesundheit GmbH, and Charité Universitätsmedizin, the joint medical school of two major universities. Center of travel and tourism The capital is a destination for both business travelers and vacationers, in approximately equal measure. The Berlin economy, trade fairs, and various political and research institutions are all major factors spurring demand among business travelers. Demand in the leisure segment derives from Berlin s rich history and the many cultural events and institutions located in the city. Measured by the number of overnight stays, Berlin is the most attractive location for tourists in Germany. The most popular attractions include the Fernsehturm (TV tower), the Tierpark Friedrichsfelde Zoo, the Gardens of the World, the Brandenburg Gate, the Kaiser Wilhelm Memorial Church, the Berlin Cathedral, the Berlin Zoo, and the Pergamon Museum. 3 Market Report 2014/2015 Hotel Colliers International

4 Trade fair grounds The Messe Berlin group of companies posted the highest sales in its history in the 2014 fiscal year, at over 265 million euros. With a total of 69 trade fair and conference events and over 27,000 exhibitors, more than 1.9 million visitors were registered. One particular highlight of this year was the start of operations at CityCube Berlin (22,000 m² of usable space with 47 conference rooms and space to accommodate as many as 11,000 participants). The largest trade fairs in Berlin are International Green Week (over 415,000 attendees), the IFA Consumer Electronics Unlimited (over 240,000 attendees) and the ILA Berlin Air Show (over 227,000 attendees). Hotel market 2014 once again saw record figures in Berlin on both the supply and demand side as compared with the previous year. As of the end of the year, 794 accommodation providers offered 137,099 beds (up 1.8%). The Berlin hotel market structure remains dominated by the three-star and four-star segments (45% and 29%, respectively). Twelve hotels (approximately 2,300 rooms) will open between now and the end of 2015, including the RIU Plaza Hotel Berlin, with 357 rooms; the Stadtpalais Klosterstraße, with 250 rooms; two Moxy Hotels with almost 460 rooms in all; and the Four Points by Sheraton Airport Berlin, with 253 rooms. Two Motel One Hotels with over 1,200 rooms are scheduled to open in Another three hotels with unknown opening dates and the expansion of the Estrel Tower are in the pipeline. All told, as many as 17 hotels and 4,600 rooms are expected to be added to the Berlin hotel market. The number of overnight stays in Berlin has more than doubled over the last ten years. In terms of the number of overnight stays, Berlin remains far and away Germany s most popular travel destination. On the demand side, the number of guests rose 4.8%, to 11,871,326, and the number of overnight stays increased by 6.5%, to 28,688,663. Of that figure, foreign guests account for 44% of overnight stays, which increased 8.1%, and German guests make up 56%, up 5.3%. In terms of the number of guests and overnight stays, the countries of origin most strongly represented in 2014 are the UK (1,279,000, +7.8%), Italy (931,900, +10.4%) and the United States (923,000, +10.5%), followed by the Netherlands (827,000, +8.1%), Denmark (660,800, +3.6%), Spain (658,700, +8.9%), France (616,400, -1.6%), Switzerland (598,900, +4.0%), Russia (484,700, -4.2%), and Sweden (448,400, +5.9%). The average stay length was 2.4 days for German visitors, and the figure for international guests was 2.8 days. Full-service hotels account for 53% of overnight says, hotel garni properties make up 29%, youth hostels and similar providers 13%, and guesthouses and bed and breakfast facilities 2%. The largest numbers of overnight stays are noted in May, July, August, and October. Hotel market structure by classification Source: booking.com Development of accommodation supply Source: Colliers International, Federal Statistical Office Development of accommodation demand (in thousands) Source: Colliers International, Federal Statistical Office 4 Market Report 2014/2015 Hotel Colliers International

5 Hotel performance Berlin remains one of Germany s most attractive hotel locations for hotel investors, with solid growth figures. Average bed capacity utilization stood at 57.0% for 2014, an increase of 1.9%, and the average occupancy rate was 76.6%, up 2.0%. The average room rate (ARR) also rose during this period, increasing by 2.0% to This put RevPAR at 68.00, up 4.0%. Figures for Berlin are thus above the German national average. Rating and outlook With a large number of new hotel projects, including trendsetting ones such as the new Moxy Hotels from the Marriott Group, Berlin remains the largest market for hotel investments in Germany. Chain hotels in particular focus on Berlin for their investments. As a result of trade fair schedules, 2015 is unlikely to see an increase in RevPAR or the number of business travelers, as the biannual BAUTEC, ILA, and International Suppliers Fair (IZB) are not scheduled for this year. Based on the positive employment growth, stable guest and overnight stay figures, attractive shopping options, and steady growth on the demand side, Colliers International expects the positive market development in Berlin to continue. A good local public transit network and a central location are key criteria for success. Investors are focusing on economy products in particular. Parameters of the hotel market in German major cities OPERATIONAL FIGURES 2014 City Occupancy change to previous year ARR change to previous year RevPar change to previous year Berlin 76.6 % 2.0 % % % Dusseldorf 66.9 % 5.7 % % % Frankfurt a. M % 3.4 % % % Hamburg 79.4 % 1.8 % % % Cologne 70.3 % 1.6 % % % Munich 78.3 % 1.9 % % % Stuttgart 73.7 % 4.5 % % % Germany 70.1 % 2.3 % % % Source: IHA Deutschland 2015 / STR Global 5 Market Report 2014/2015 Hotel Colliers International

6 502 Office in 67 Countries on 6 Continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 Author: Janin Rynski Research Analyst Hotel janin.rynski@colliers.com Colliers International Hotel GmbH Budapester Strasse Berlin Germany TEL FAX billion in annual revenue 75 billion in total transaction volume in more than 84,600 lease and sale transactions 160 billion square feet under management 16,300 professionals and staff About Colliers International Hotel GmbH As part of Colliers International, Colliers International Hotel GmbH provides a full range of hotel real estate services; it sees itself as the lifeblood of brand-name hotels and is at the disposal of clients throughout Germany. Colliers International Hotel GmbH advises hotel corporations, investors, hotel operators as well as project developers on their choice of location, business concept and brand strategy. Together with associates, they provide financing and equity-partners. Moreover, Colliers International Hotel GmbH seeks out the right hotel properties to suit the investor s needs. Colliers International is a global leader in commercial real estate services, with over 16,300 professionals operating out of more than 502 offices in 67 countries. colliers.com Picture credits: Photo and (Thinkstock Photos) Copyright 2015 Colliers International Hotel GmbH. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report..