A YEAR OF TWO HALVES: EUROPEAN HOTELIERS RISE TO THE CHALLENGE

Amsterdam/London -- Andersen, the leading adviser to the international hotel industry, today released 2001 hotel performance data for major European markets at the European Hotel Managers Association annual conference in Amsterdam.

Across Europe hotels reported an average annual occupancy of 66 per cent, a decline of 4.4 percent on 2000. Encouragingly, average room rates (in euros) moved ahead marginally to reach Euro 112. As would be expected, there was a marked difference in the performance of the market pre and post-September 11. Prior to the events of September 11, revPAR across all European hotels was up 1.8 percent. A decline of 13.9 percent in the last four months of the year resulted in revPAR ending the year at Euro 74, (3.9 percent down on 2000 levels).

Julia Felton, director of Hospitality Knowledge Services at Andersen comments that "despite the tough trading conditions during the year, the industry has largely managed to weather the storm".

Felton added "2001 proved to be a testing time for hoteliers across Europe, many of whom faced one challenge after another. Even before the year began, we knew that 2001 was not going to be an easy year given the exceptional performance in 2000. Against the backdrop of a slowing global economy, as 2001 progressed the odds stacked up against hoteliers, with the outbreak of Foot and Mouth Disease and the atrocities of September 11 significantly impacting demand. Despite declining occupancy, however, European hoteliers in most cities have risen to the challenge and managed to record increases in average room rates when measured in euros".

There was a significant variance in the performance of the 40 European markets Andersen tracks, with 16 cities reporting revPAR increases and 24 cities reporting revPAR declines. The only markets to witness double-digit growth in revPAR during 2001 were Moscow, Cardiff and Cyprus and these were also the only markets to report an improvement in occupancy over 2000 levels. The performance of the Moscow market is attributable to the strong recovery of the Russian economy, whilst in Cardiff the market is rebounding from an over-supply situation which depressed demand in 2000, and the city is also benefiting from the new stadium.

Source: Andersen Hotel Industry Benchmark Survey (all analysis in euros)

London was perhaps the hardest hit of all the European markets during 2001 due to its significant reliance on international tourists, especially those from the US. Occupancy fell to 74 percent, a decline of 9.6 percent over 2000. Diminished demand forced the market to enter into price discounting, resulting in a 5.8 percent fall in average room rates when measured in euros.

Felton adds "the performance of the London market relative to the rest of Europe has also been impacted by the strength of sterling against the euro, as in local currency the market only experienced a 4.1 percent decrease in average room rate. It is also interesting to note that the only markets that typically did not report any growth in average room rates are those where the economy is not linked to the euro - Sweden, Turkey and the UK."

In 2001 Geneva beat Paris to the title of most expensive destination in western Europe, with the city recording a market-wide average rate of Euro 190. Hotels in Paris came in second at €183, followed by Rome at Euro 174. London, which is often one of Europe's most expensive cities, fell to fourth place as a result of the fall in average room rates. Only two western European gateway cities - Berlin and Lisbon - failed to achieve an average room rate over Euro 100.

Nick van Marken, the Partner responsible for hospitality consulting in Europe notes that "the European hotel industry undoubtedly faced many challenges during 2001 but has responded rapidly to the changes in trading conditions. As a result we are cautiously optimistic about the outlook for 2002 and believe we may well see an upturn in mergers and acquisition activity.

Although the performance of gateway cities is likely to remain exposed, we believe provincial markets should be relatively insulated, since their main demand source is domestic visitation. Indeed, if consumers opt to holiday closer to home these markets and Mediterranean resorts may well benefit".

Copies of the Andersen Hotel Industry Benchmark Survey Annual Survey - Europe are available for purchase at a cost of £250 from Andersen. Please call us on 020 7304 1304 or e-mail us at hotelbenchmark@uk.andersen.com

Launched in 1996 as the definitive source of hotel performance data outside North America, the Andersen Hotel Industry Benchmark Survey comprises information gathered from more than 5,500 hotels in 300 markets across 140 countries. The survey currently tracks hotel performance everywhere outside the North America. Regional surveys are produced for Asia Pacific, the Caribbean and Latin America, Europe and the Middle East and Africa. These are supported by in-depth country/city reports for Australia, Germany, Italy, New Zealand, South Africa, the UK and London. Further surveys are underway for Benelux, Japan, Scandinavia and Spain. For more information or to join the survey, contact Lorna Clarke in London at 44 20 7438 2870, e-mail us at hotelbenchmark@uk.andersen.com or visit our web site www.hotelbenchmark.com.

Andersen is a global leader in professional services. It provides integrated solutions that draw on diverse and deep competencies in consulting, assurance, tax, corporate finance, and in some countries, legal services. Andersen employs 85,000 people in 84 countries. Andersen is frequently rated among the best places to work by leading publications around the world. It is also consistently ranked first in client satisfaction in independent surveys. Andersen has enjoyed uninterrupted growth since its founding in 1913. Its 2001 revenues totalled US$9.3 billion. Andersen refers to the brand identity adopted by member firms of the Andersen global client service network. Learn more at www.andersen.com.

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