NHC QUARTERLY NORDIC HOTEL REPORT Fourth Quarter Copenhagen Stockholm Oslo Performance data supplied by STR Global for the Copenhagen hotel market Performance data supplied by Benchmarking Alliance for the Stockholm and Oslo hotel market Nordic Hotel Consulting, Denmark Office: Kildehøjvej 27, Birkerød, Denmark www.nordichotelconsulting.com
All amounts are in Danish Kroner (DKK) for the Copenhagen hotel market, in Swedish Kroner (SEK) for the Swedish hotel market and in Norwegian Kroner (NOK) for the Norwegian hotel market Highlights An increase in the number of visitors was observed in all three cities. was rather challenging for the Copenhagen and Oslo hotel markets with declines in RevPAR and occupancy. A better performance in Stockholm was observed, as the hotel market indicated growth in ADR and RevPAR. The luxury hotel segment is the segment that showed the greatest fluctuations across the three cities and a positive RevPAR was monitored only in Oslo. There are limited hotel developments in Copenhagen and Oslo, but Stockholm has numerous on- going new developments. Visitor s Profile Copenhagen During the fourth quarter of 2011, there was a 4.8% upturn in the number of guest nights in Copenhagen; the domestic and international demands both experiencing the same level of growth. Increases in all three months of the quarter were also monitored. Copenhagen remained an international destination, as the domestic demand represented 38% of the total demand in. As for the international demand, the most visiting countries included Sweden, Norway, UK, Germany and the USA. The latter proved to be the only country that decreased its guest nights to Copenhagen, as the remaining countries showcased increases between 4.6% and 19.1%. In regards to the business mix, the combined leisure segment (leisure individual and leisure groups) experienced a 12.5% increase, whereas the combined business segment (business individual and business groups) showed a 4.4% increase, which was slowed down by the decrease of 4.1% within the business groups segment. The other segment also showed a downturn of 7.8%. The month of November was the strongest across all segments. The table below provides an overview of the nationality mix and business mix in Copenhagen during and the results are compared against their respective months of Q4 2010. 2
Stockholm The fourth quarter of 2011 proved to be a strong quarter as both the domestic and the international demands did not show any declines in guest nights in Stockholm, but did rather show an 8.7% increase. The domestic demand fluctuated and it went beyond the 70% mark in November, reaching 71%, which represented a 10% increase in guest nights. Overall, the domestic demand experienced an 8.7% increase when compared to Q4 2010. As for the international demand, a 9.3% growth was monitored, with significant increases during the months of October and November. Amongst the most visiting countries, Germany and the UK showed declines in their guest nights, 3.3% and 2.7% respectively, whereas the Nordics and the USA displayed a 10.7% and 10.3% increase respectively. The Stockholm business mix was relatively stable during. Indeed, there was a 0.6% increase in the business segment, a 3% growth in the conference segment and no variation in the leisure segment. However, the leisure group segment showed a 4.4% decrease during the same quarter. The month of December was the most challenging with declines in almost all segments, apart from the business segment. The tables below show the evolution of the fourth quarter of 2011 relating to the nationality mix and business mix in Stockholm and the results are compared against their respective months of Q4 2010. Oslo In Oslo, the domestic demand remained strong in, as it represented 73% of the total demand, which is the equivalent to a 3.6% increase. The number of domestic guest nights to Oslo dropped during the month of October, but it recovered in the following two months. In regards to the international demand, the latter plummeted sharply in October and in December, - 8.1% and - 11.6% respectively, whereas it experienced a small recovery of 0.5% in November. Among the most visiting countries, Denmark 3
and the UK are the only two countries that showed increases in their guest nights, with growths of 44.7% and 9.3% respectively. Nevertheless, sharp decreases were observed for Germany, the USA and Sweden where they each suffered from 23.5%, 19.4% and 4.4% declines. Concerning the business mix for Oslo, although the business segment experienced an increase of 9.2%, the leisure and the conference segments suffered from a 9.8% and 1.6% drop respectively. November was the strongest month for the business segment with an increase of 11.7% while the month of October was the weakest month for the leisure and conference segments. Below are the tables depicting in regards to the nationality mix and business mix in Oslo and the results are compared against their respective months of Q4 2010. Hotel Market Analysis The following section offers an overview of the hotel market performances of the three Scandinavian capitals. Copenhagen The final quarter of 2011 proved to be rather challenging for the Copenhagen hotel market. Indeed, the occupancy level dropped by 8% and so did the RevPAR, as it indicated a decline of 6.9%. Nevertheless, the ADR showed a 1.1% increase during the same quarter and is the only key indicator that experienced growth in all three months. The month of November was the strongest month of Q4, even though it still suffered from decreases in occupancy and RevPAR in the order of 3.9% and 1.2% respectively. The most difficult month was December, as it experienced a 12.7% and 12.6% decline in occupancy and RevPAR respectively. Even though there was an increase in individual business travels in October, the drop in occupancy during that month, 7%, can partially be explained by the fact that fewer conventions struck the Copenhagen market, which was shown with a decrease in the share of the business groups segment in the first section. Indeed, even though the number of hotels in Copenhagen have grown since the beginning of the year, October did 4
not follow the curve as it did in October last year mostly because of the drop in international conferences. The importance of convention guests and business travel is tremendously vital, as these guests capital expenses are significantly higher than leisure guests. Nonetheless, at the end of 2011, Wonderful Copenhagen booked 44 congresses in Copenhagen for 2012 and the goal is to secure at least 50 conventions. Consequently, these congresses alone, will amount to tourism revenues of one billion Danish kroner. The subsequent table offers an overview of the hotel market performance in Copenhagen during Q4. Stockholm The Stockholm hotel market performed better than the Copenhagen hotel market. Indeed, apart from a 1.7% downturn in regards to the occupancy level in Stockholm, the two remaining key indicators both showed increases, i.e. 5.4% in ADR and 3.7% in RevPAR. October proved to be a robust month with a 12.8% rise in ADR and a 14.1% upsurge in RevPAR. The month of November followed a similar pattern, with increases in both indicators, although the growths were at a lower rate, that is 2.2% and 1.6% in ADR and RevPAR respectively, and with a 0.6% decrease in occupancy. December was definitely the most challenging month with declines in both occupancy and RevPAR; 5.7% and 4.6% respectively, and a reserved 1.1% increase in ADR. The table below provides an overview of the hotel market performance in Stockholm during Q4. Oslo The fourth quarter in Oslo experienced both ups and downs, November being the strongest month and December the weakest. Indeed, during the second month of the fourth quarter, all three key indicators experienced growth: 1.6% in occupancy, 4.4% in ADR and 6% in RevPAR, whereas the last month of the quarter showed declines in all key indicators: 4.4% in occupancy, 1.5% in ADR and 5.9% in RevPAR. The first month of the quarter showed mixed results with negative results in occupancy and RevPAR, but positive results in ADR. The results of the quarter were thus declines in occupancy and RevPAR in the order of 1.9% 5
and 0.4% respectively, combined with an increase of 1.5% in ADR. The decline in occupancy can be partially explained by the increase in capacity in Oslo. The table below proposes a snapshot of the hotel market performance in Oslo during Q4. Discussion and comparison of the luxury hotel segment between the three cities During the fourth quarter, the hotel segment that showed the greatest fluctuations between all three cities is the luxury segment and will thus be reviewed more in- depth. Confusing to start discussing other segments, all segments are discussed above under general market? Other segments deleted. All three cities suffered from a drop in occupancy in October, but an increase in ADR was noticed; the luxury segment in Stockholm achieving the best results with an increase of 12.1% and a growth of 10.1% in RevPAR. The rise in ADR for the Copenhagen market was not enough to offset the 5.1% decrease in occupancy and consequently, the RevPAR indicated a 4.5% drop in October. In regards to the luxury segment in Oslo, the decrease in occupancy was almost balanced out by the increase in ADR, which ensued a weak decrease of 0.5% in RevPAR. The most prominent difference during the fourth quarter lies in the month of November. Indeed, the luxury segment in Oslo thrived during that month with increases in all three key indicators as follow: 2.4% in occupancy, 6.2% in ADR and 8.7% in RevPAR. In regards to the luxury segment for the Copenhagen market, it experienced a dip in occupancy, - 4.7%, but an upsurge in ADR, 1.7%, which had for final consequence a negative performance of - 3% in RevPAR. The luxury segment in Stockholm was the weakest segment with significant decreases. The occupancy fell by 12.9%, the ADR by 3.4% and the RevPAR by 15.9%. The roles were reversed for the month of December as the luxury segment in Stockholm performed the best, Oslo came second and Copenhagen finished last. Although the occupancy level dropped slightly in Stockholm, 1%, it was counter counted by an increase of 2.4% in ADR, which resulted in a growth of 1.3% in RevPAR. The Oslo luxury market showed a neutral performance, as the occupancy and ADR performed to the same opposite, i.e. - 2% and 2% respectively. In regards to the Copenhagen hotel market, even though there was a 4.8% increase in ADR, the significant decrease in occupancy, 21.2%, resulted in a drop of 17.4% in RevPAR. The tables below provide an overview of the luxury segment performance during Q4 in all three cities. The first table is in local currency and the second table is in Euros as to facilitate the comparison between the cities. 6
New Developments Copenhagen There are very few definitive developments planned in Copenhagen in the next couple of years. The table below thus shows the limited entry of new supply. Nonetheless, many hotels have undergone or are undergoing renovations or extensions. Scandic Sydhavnen has completed its expansion with an additional 100 rooms and Park Inn by Radisson Blu added 100 rooms as well as renovated and expanded its conference capacity with three additional conference rooms that can accommodate up to 260 people. Marriott Copenhagen is currently renovating its whole property, whereas Hotel D Angleterre has closed its doors to undergo a complete makeover that will downsize its property to 91 rooms for its expected reopen in early 2012. Hilton Airport Hotel is undergoing 7
renovations under the theme Room for the New which will cover the entire hotel. Finally, Radisson Blu Scandinavia is refurbishing 470 rooms, inspired by spring and autumn designs, which will be completed by December 2012. Furthermore, there is a rumored project concerning Radisson Blu Scandinavia, as it applied for a planning permit to extend the hotel with 450 additional rooms and conference facilities on 10 more floors, which would totaled 992 rooms. During the fourth quarter of 2011, five hotels formerly part of the Choice Hotels portfolio changed their names to fit in their new portfolio, First Hotels. Hence, Clarion Hotel Copenhagen changed its name to First Hotel Copenhagen, Comfort Hotel Xpress CPH swapped to First Hotel Østerport, Comfort Hotel Esplanaden became First Hotel Esplanaden, Comfort Hotel G switched to First Hotel G & Suites and Comfort Hotel Excelsior was modified to First Hotel Excelsior. Finally, a recent study performed by Jones Lang Lasalle showed that hotels in Copenhagen are currently well- liked among global investors with a level of interest of 62.6%. Copenhagen follows Stockholm, which has a level of interest of 66.7%. Stockholm In the fourth quarter, Scandic Grand Central opened its door in October. The hotel offers 391 rooms, conference facilities, a restaurant, a bistro and a fitness centre. In regards to Best Western PLUS, by Bromma Airport, it opened in September and benefits from 202 rooms, a restaurant, a bar, a gym and a sauna. Lastly, the IBIS Arlanda renovated its property and added 38 rooms, bringing the total number of rooms to 117 rooms. In the next four years, Stockholm will see its supply increasing by 1,682 rooms, as there are currently seven different hotel projects in the works. The table below showcases the new hotel developments in Stockholm. Choice Hotels are currently strong in its expansion in Stockholm. Moreover, numerous developers are opting to establish their hotel properties mainly outside the city centre of Stockholm. Finally, various project discussions are presently taking place and if these projects come to fruition, it would total 7,000 additional rooms in the greater region of Stockholm in the next five year. 8
Oslo October saw the opening of the Scandic Vulkan in Oslo, which offers 149 rooms, a bar, a restaurant and a fitness centre. As stated in the table below, Rezidor is planning on opening a property with a dual- brand concept that is with a Radisson Blu and a Park Inn by Radisson. Wenaas Gruppen will be responsible for building the adjacent towers that will house both brands and a restaurant, a bar, a fitness centre and parking facilities will be found in the property. In the next two years, Oslo will see an increase in its hotel capacity with 641 rooms spread over 4 hotel properties. About NHC Nordic Hotel Consulting is the leading hotel consultancy in the Nordics and has offices in Copenhagen, Århus, Oslo and Stockholm. In order to satisfy an increasing demand, an investment advisory division was created in 2012 and in 2011, the NHC Asset Management division was also established. The NHC Group thus encompasses Consulting, Investment Advisory and Asset Management. NHC has since 2004 carried out a range of assignments including feasibility studies, appraisals, operator search, contract negotiations, investment- and transaction advisory and more in the Nordics and Europe. For additional information on NHC, please refer to our website: www.nordichotelconsulting.com. Copyright This report is the property of NHC and may not be reproduced in parts or whole prior to the written consent of NHC. Disclaimer NHC does not guarantee the accuracy of the data presented in this report and cannot be held liable here for any analysis, opinions or decisions derived from reading this report as it is solely at the responsibility of the reader to draw up conclusions. NHC cannot be held liable for any outcome of analysis, opinions and decisions formed based on the information presented in this report. Contact Karine Bourget Hotel & Leisure Consultant Nordic Hotel Consulting Mobile: +45 28 56 52 96 kb@nordichotelconsulting.com www.nordichotelconsulting.com 9
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