Italy defies global trends as luxury continues to amaze

Hotel performance in Italy has continued to buck global trends, with luxury continuing to significantly drive rates, and hotels across the country achieving significant increases in guest spend in other areas of the hotel such as food and beverage.  

Experts at the Italian Hospitality Investment Conference (ITHIC) agreed that the luxury segment has been the driver of Italy’s outperformance in recent years, adding that the segment has continued to take up the lion’s share of investment. 

“51 per cent of investments are focused on upper upscale and luxury,” Alessandro Lombardo, chief commercial officer of Gabetti noted, also stating that assets in this segment made only 22 per cent of the total portfolio in Italy, further illustrating the role of luxury assets in the Italian hotel sector.  

Further driving this point home was the very recent purchase of the Six Senses Rome by Gruppo Statuto. Only a couple of days before the start of the conference, news broke that the luxury resort had been purchased for €245 million, with the €2.6million per key price tag representing the second highest in Italy after the Rosewood Castiglion del Bosco. 

This interest in luxury assets in the country shouldn’t come as a complete surprise. 

“Post-Covid, Southern Europe is very much leading the way, with western Europe following behind and within that, aligned with those record levels of ADR, Italy is leading the way in southern Europe,” Michael Grove, COO at HotStats said. 

He added that from a profitability perspective, Rome and Milan are well ahead of most markets in Europe when it comes to profitability growth comparing with 2019 as well as with 2022. 

F&B Profit uplift 

Even more positively, Italy has seen an uplift in F&B profitability, with hotels achieving more F&B revenue than other comparable markets which struggle to secure higher revenues outside of higher ADRs. 

“Overall, revenue is 30 percent up and profitability is 41 per cent up and there’s a substantial uplift in margin of eight percentage points since 2019 and three percentage points versus last year. Versus last year, Italy continues to see growth in not just spend on hotel bedrooms (ADR) but also quite significant guest spend increase in other areas of the hotel operation; overall, there’s a growth of 9% versus last year per occupied room,” Grove said. 

He added: “From a food and beverage perspective, we’ve seen guests spending more money in food and over the last 18 months we’ve seen a significant ramp up which we haven’t seen in the rest of Europe.” 

However, Robin Rossman, managing director at STR warns that year-to-date, there’s been a global slowdown of luxury rate growth year-on-year. 

“Comparing with last year, we’ve seen luxury revpar growth slow down although it’s still up 23 per cent. However, positively, luxury demand has still actually not recovered to 2019 levels so there is some upside there.  

Looking ahead to Q4 performance, Rossman noted that business on the books for Italy as a whole is in very positive territory, adding that the continued bounce back in shoulder months should continue, with occupancy expected to grow, aiding rate growth. 

“Italy looks to finish the year incredibly strong. And as we look forward into 2024, in Rome and Milan we expect some stabilization and moderation, and it will be difficult for rates to grow significantly. This may sound pessimistic but this is underpinned by the reality that luxury rates have become so high and when we look at other markets in the world, like in the US, those have tended to come back by 3 or 4%.” 

Alternative destinations 

Guido Castelleni, senior adviser at Coldwell Banker Commercial sees a garden of opportunities blossoming in alternative destinations, spotlighting the allure of wellbeing concepts in the luxury segment. 

“Looking at what I expect to be more appealing to hotel investors in 2024, the big 4 cities are always in every investor’s mind. However, the values are very high. I think wellbeing concepts in the luxury segment will appeal; I think the trend of wellbeing and relaxation presents opportunities and there’s  a chance to renovate some of properties which are more off the beaten path.” 

In conclusion, the Italian hotel sector, particularly in the luxury segment, is in a remarkable position, showing resilience and significant growth and defying global trends. Investments in the luxury hotel sector continue to pour in, demonstrating investor confidence in its ongoing potential and profitability. Despite warnings of a potential slowdown in luxury rate growth globally, Italy’s luxury hotel sector maintains a promising outlook. While the focus remains predominant in main cities like Rome and Milan, attention is subtly shifting towards uncovering opportunities in more unexplored destinations.