Italy (and Europe) hotel results in June

So, here we are, at the first turning point of post-Covid, with the results of Italian accommodation facilities in the first month since the end of lockdown (which came into effect as of June 3).

Results were certainly positive, especially in light of all the prevailing handicaps at the onset, which resulted in many hoteliers having very low expectations.

The truth is that the data recorded in June merely confirmed a trend that we had already predicted in a previous article.

Below is a graph depicting occupancy results from March to June in facilities currently using our consultancy services and revenue management software Revolution Plus (300 on the entire Italian territory, of every category and size), grouped according to type of destination (seaside, mountain, lakeside, city), in which the sharp recovery in June is evident.

As evidenced by the graph, the best-performing destinations are seaside, lakeside and mountain locations, driven by the domestic leisure segment and weekends peaks.
Most of the properties in these leisure destinations were able to end the month with a break-even or a profit, something unimaginable a few months ago, and in some outstanding cases even improve the results of June 2019. In that sense the good (or bad) weather was definitely more critical than Covid-19 in determining the performances of these properties.

Conversely, art towns or cities with a dual business/leisure vocation are especially struggling, due to the absence or scarcity of foreign travellers on which this type of destination relies the most, restrictions on travel and lack of events and conventions canceled due to Covid-19.

However, it must be said that cities have also experienced a significant recovery, in comparison with the situation of previous months (March, April, May). And it’s very important to underline how the situation in major cities like Rome, Milan or Florence is quite mixed when it comes to the area where the hotels are located.

Because it was not so uncommon in June to see the hotels near central stations or airports reaching 90%+ daily occupancy during the midweek (catching transient business demand) and hotels near major attractions like Colosseum in Rome or Duomo in Milan still struggling between 10% and 30% daily occupancy.

If June was positive, all things considered, given the difficulties involved, the trend over the next few months promises to be even more encouraging, as suggested by the two graphs below showing both the percentage change in occupancy occurred over the course of 4 weeks (1 June-29 June) for the upcoming months from July to September, followed by the situation as of 1st July on forward occupancy for the same months, segmented by type of destination.

As we can see, there is likewise a slightly improving trend for large cities, and although cities percentages to current date may seem very low, it must also be said that by analyzing the trend in June, also due to the prevalence of domestic customers (both business and leisure), the booking window has been significantly reduced compared to 2019, which leads us to predict an exponential increase in occupancy as we move forward and closer to check-in date.

And it is very likely that we will see a sharp rebound starting from September, with the resumption of events and mice sector.

Another encouraging sign comes from the excellent percentage of foreigners for existing reservations booked within the last 60 days and with check-in date from July to the end of current year, a figure sourced from Booking.com regarding facilities that currently utilize our consultancy services and software.

We believe that this percentage will continue to increase as countries gradually veer towards the easing of restrictions, flights increase their frequency, and fear and mistrust towards the idea of travel are likely to dwindle even further.

It must be noted that these percentages may vary according to the type of destination.

But something interesting to take into account is that for large and main Italian cities, even if for obvious reasons the share of reservations from certain foreign markets has drastically lowered or gone down to zero, there are other geographic source markets (especially Europeans, like Germany, France, Netherlands, Switzerland, UK, Belgium) that turned out to be very responsive and maintained a good share of reservations.

The following graph, extracted from Booking.com on a typical large and central 4-star hotel in Milan, reflects some trends that are detectable (with all due variations) in some other key business/leisure cities like Rome, Florence, Venice etc.

We can safely say that these results are basically aligned with what is happening at a macro level in Europe, as evidenced by STR (the biggest hotel benchmarking company in the world) data showing an upward trend for Europe.

We should bear in mind that these average occupancy rates at a national level are the result of occupancy fluctuations that appear quite evident when we analyze the difference between main cities and the purely leisure regional destinations (seaside, mountain, lakeside, etc.).

We should also not overlook the fact that, since this average refers to open hotels only (and not to all hotels, both open and closed), surely the pace and trajectory of future growth will be related not only to the increase in demand (linked to health developments, transports, government and travel restrictions etc. of the current situation) but also to the gradual rise in reopenings of hotels temporarily closed to date, and therefore to the increase in supply and offer of accommodation facilities

In conclusion, although the situation remains complicated and fraught with uncertainty (in a scenario of coexistence with the virus where the common sense and the individual responsibility of each one of us is crucial as much as governments decisions to allow tourism and travel industry to survive before better times come around), it is certainly significant and encouraging that most of the world’s countries have now resumed tourism activities and are now on a upward trend, with the international segment also showing signs of an upturn.

A clear indication that the eagerness to travel of the majority of people (whether it be by plane, train, bus, car, short, medium or long-haul etc.) is gradually prevailing over psychological fears and economic difficulties.

And while on this article we focused just on occupancy, on next ones we will start analyzing also ADR and Revpar, since there are encouraging signs also from this perspective.