It’s probably not surprising in these straitened times that the European hotel market has polarised. While luxury and resort destinations have become increasingly popular as leisure customers embrace travel, the major hotel groups have been looking to optimise their value brands – expanding in key European markets and consolidating branding to create a clear message.
Recent data from industry analyst Lodging Econometrics (LE) showed that there were just over 1,700 hotels in the construction pipeline across the continent at the end of 2022, which would add a total of 261,000 rooms to Europe’s available stock. This includes 784 projects currently under construction, with another 403 set to start during 2023.
“Travel activity in Europe is expected to continue to rebound in 2023 and as hotel operating performance increases, owners, investors and franchise companies will continue to focus on development efforts in the region,” LE concluded in its analysis of the market.
The big players are among those moving forwards most aggressively. At the start of the year, France-based Accor had the most European properties in the pipeline, with 286 hotels, followed by Hilton with 195, Marriott International, 185, and InterContinental Hotels Group with 153.
And in terms of brands, it is Accor’s Ibis budget chain leading the way with 99 projects in Europe, followed by Hampton by Hilton with 74. IHG’s Holiday Inn and Holiday Inn Express also account for a combined 77 projects, with Marriott planning a further 41 sites for its funky, affordable brand Moxy.
The UK has the largest number of new projects underway in Europe with 295 hotels, ahead of Germany (257), France (152) and Portugal (130).No surprise then that Premier Inn is continuing its UK expansion by adding another 11 properties over the 12 months. The Whitbread-owned budget chain has grown its UK footprint by 1,500 rooms over the year, following the opening of the Hub by Premier Inn Clerkenwell, London.
Other recent debuts include another two further London hotels in Canary Wharf and Paddington Basin, plus properties in Milton Keynes, Cumbria and Jersey, with Whitbread currently looking to secure new Premier Inn properties in more than 160 locations across the UK and Ireland.
“The openings show how active we continue to be having identified an increased market potential from 100,000 to 125,000 Premier Inn and hub by Premier Inn bedrooms in the UK and Ireland,” says Alex Flach, UK development director for Whitbread.
Fresh UK competition
However, Premier Inn may find itself facing new competition after France-based B&B Hotels announced plans to extend its operations into the UK late last year, with the target of opening 100 new hotels by 2035. Established in 1990, B&B Hotels has grown to nearly 700 hotels across 14 European countries and is backed by capital from owner Goldman Sachs.
B&B Hotels’ entry into the UK market and its growth strategy will include a combination of leasing new hotels with development partners, takeovers and conversions and CEO of Central and Northern Europe Max Luscher, says: “With over 650 hotels and 59,000 rooms in our B&B global portfolio, we are well positioned to bring our overseas experience and business model of providing a high-quality hotel experience at affordable rates to UK consumers.”
B&B Hotels’ approach has so far helped secure its position as a top budget hotel operator across several European countries including number one in Italy, number two in Germany and Spain, and number three in France.
Spanish and French markets
Meanwhile, budget hotel brand Travelodge is targeting Spain to take advantage of a “significant gap” for lower-priced properties and recently announced plans to take over the existing 78-room NH Villa de Coslada hotel, Madrid as well as appointing investment specialist Aldaba Partners to help the chain grow its portfolio in Spain.
“At present, the Spanish hotel market is dominated by independent hotel owners, franchise and management agreement operators and shorter leasehold operators,” said Travelodge. “However, our research showed that investors are increasingly looking for stable long-term income streams in support of Spain’s growing tourism industry. This fits well with Travelodge’s traditional long-term fixed lease model, as used in the UK.”
Travelodge already has five properties operating in Spain and the hotel firm, which has around 600 hotels in the UK, Ireland and Spain, will rename its latest Spanish property as a ‘budget-luxe’ Travelodge Madrid Coslada Aeropuerto. It will be Travelodge’s third hotel in Madrid. The chain also already operates two hotels in Barcelona and one in Valencia.
“The Spanish hotel market is growing at pace with demand exceeding supply and we want to take this opportunity to take the Travelodge brand to new business and leisure locations across Spain,” says Steve Bennett, Travelodge’s chief property and development officer.
For its part, Accor has launched the Handwritten Collection, a global portfolio of independent hotels in the mid-scale segment - its third ‘collection’ brand. It will be founded on hotel conversions rather than new builds.
The portfolio currently includes 12 secured signings, with five properties expected to have opened by the end of the first quarter of 2023, and another 110 hotels currently in negotiations to join the Handwritten Collection.
Additional properties in France, Estonia, Romania and Spain are also set to open in 2024, with the global portfolio expected to reach more than 250 hotels by 2030.
Accor leverages brands
Alex Schellenberger, Accor’s chief marketing officer, premium, mid-scale, economy brands, says that the Handwritten Collection aims to “support the growing number of independent and boutique hotel owners looking to boost their global profile, connect with more audiences and grow their revenue without losing their identity”.
Accor recently reorganised its leadership team as part of a move to create two business divisions, dubbed Premium, Midscale & Economy and Luxury & Lifestyle.
Budget hotel chain easyHotel has opened a new franchise in Madrid, the chain's 19th franchised hotel as part of its ambitions to have more than 100 franchised hotels by 2026. The easyHotel Madrid Centro Atocha has 230 rooms and a car park and is operated by Continuum Hotel Management and housed in a 6,000 sq m building, which was acquired in 2020 by Extendam.
Indeed, easyHotel will focus on Spain and France for the development of its portfolio and plans to locate almost 20% of its assets in the country, with construction of two new hotels in Valencia and Barcelona underway, having recently opened hotels in Barcelona and Dublin. Paris-Nord Aubervilliers opened its doors with a 180-bedroom hotel in March, marking the group’s third hotel in France, joining hotels in Nice and Paris-Charles de Gaulle Airport.
While rising debt costs could slow value hotel development, the cost of living crisis is likely to make demand for high quality, low cost accommodation greater than ever. That could mean a race to snap up unbranded independents to build dominant European portfolios.