Italy (and Europe) hotel results in July and trend for the coming months

Here we are again, at our usual appointment to analyze the final performance figures of Italy, with a glance toward developments across the world and over the coming months.

July confirms and reinforces the positive growth trend in Italy that had already emerged at general level in June.

The breakdown of occupancy and ADR (average daily rate) performance for clusters of destinations on a sample of 300 facilities currently employing our revenue management software Revolution Plus and our consulting services shows that purely leisure locations (seaside, mountain and lakeside), driven by strong domestic demand, have quite evidently succeeded in approximating the performance of July 2019, thus managing to conclude the month with a favorable and positive cost-to-income ratio and driving the overall national average towards an encouraging 62,47%.

These results are worth highlighting especially in view of the catastrophic forecasts of just a few months ago concerning the tourism and hospitality sector.

Business-oriented cities have recorded relatively high occupancy levels (60,2%) and are in line with financial sustainability benchmarks.

As noted in the previous article, art/leisure cities (like Venice, Florence etc.) which draw mainly on the international leisure segment currently hold the lowest occupancy rate (35,71%) compared to other destinations, but it is nevertheless on the rise compared to the last few months, partly due to the recovery of the European segment (in particular German, French, Dutch, English and Swiss travelers).

It should be stressed that the above results pertain to a sample of 300 facilities currently employing our revenue management software Revolution Plus and consulting services.

Analyzing the situation of the Italian market across the board, as reported by STR (the largest hotel benchmarking company in the world, which collects data of over 70.000 hotels), the national average occupancy rate for July in Italy is significantly lower (around 30%, anyway quite higher than previous months), but the difference between domestic leisure destinations and major cities remains conspicuous, in line with the observable trend at a European and global level.

While it is true that July has proved very satisfactory in terms of results, August could well be the month in which, weather and health conditions permitting – given the current booking trend and on the books occupancy rate and ADR (as at August 2) – we might witness monthly turnover figures exceeding those of 2019 on all leisure destinations (seaside, mountain, lakeside, etc.).

As far as major cities are concerned, we continue to believe that September, and especially October, may well mark a sharp trend reversal, both for the resumption of events and conferences, and for a natural shift in the seasonal and climatic preferences of leisure travelers from seaside and mountain destinations to art cities, as well as improved flight regularity and increased confidence and serenity toward medium-long haul trips.

Even if percentages from September onwards might seem still low (compared to last year business on the books), it must be said that in major cities we are statistically noticing a booking window reduction by 15-20 days compared to last year, which means that most of pickups are coming in the 7-10 days before check-in.

Clearly, the current global health situation is an unknown factor; however, as we can infer from the case of China (shown in the graph below), which experienced a minor second wave in the second half of June (particularly in the capital Beijing), the impact of second waves on hotel performances is correlated with the ability to control outbreaks in a timely manner, in relation also to the individual responsibility of each one to follow common sense rules and avoid the spread of the virus.

Moreover, any drop in the occupancy rate of accommodation facilities linked to the emergence of outbreaks contained in good time (before they turn into problems for hospitals) and temporary and localized restrictive measures, as was the case in China in June, can be followed by an equally strong recovery of occupancy levels, even stronger than the decline itself.

We will continue to monitor the evolving situation, in hopes of delivering even more positive news at our next appointment.