Insights into European Hotel Customer Spending

“When talking to people in the hotel industry, one of the most common questions we are asked is: how has spending in the industry recovered from the downturn?”


This is probably the key question facing business at the moment, and Sujata Bhatia, Vice President for American Express Business Insights Europe and Asia, outlined some key trends which may help to address this question at the exclusive industry launch of a research report into the European hotel industry today.

With over 90 million cards in circulation and over 5 billion transactions annually in 127 markets, American Express Business Insights is well placed to offer in depth insights into hotel customer spending habits and trends. The presentation this morning certainly generated some healthy discussion amongst those present.

The insights provide an in-depth look into the state of the hotel sector across the major European markets. Spending was analysed for the UK, Italy, Germany, France and Spain, from before the downturn in 2007 to the end of the first quarter in 2011. The research found that:

  • The European hotel industry is showing steady signs of growth, although it is yet to recover to pre-downturn levels.
  • Overall hotel spending in Europe grew 7 percent in 2010, with a further 4 percent growth in the first quarter of this year.
  • The UK hotel sector led spending growth in urope in 2010, growing at a healthy 10 percent, followed by France (7 percent) and Germany (4 percent).
  • None of the markets has returned to pre-downturn levels. However, the UK, France and Germany are almost back to 2008 spending levels. While Spain (8 percent) and Italy (4 percent) also grew in 2010, they were hit harder by the downturn and have further to go before they recover to 2008 levels.
  • In the UK it is London and Scotland which are recovering fastest, with London seeing an increase of 10 percent year-on-year growth in 2010 and Scotland 5 percent. In Q1 2011 London has grown 9 percent year-on-year, while the Midlands have dropped 11 percent. The North is down 3 percent and the South East and Scotland remaining the same. Overall, this equates to 5 percent growth in Q1 2011 for the UK as a whole.
  • One of the main points that Sujata made was that the market will depend heavily on the second and third quarters of 2011 as indicators of economic growth and recovery. Q1 2011 has been positive – more so in London than the provinces – but the coming summer will be vital for the industry.

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Major trends discussed today were:

After a large drop off, tourists from outside Europe return

  • The analysis found that visitors to Europe are an important driver of the recovery – in short, tourists are back. Representing one-third of all leisure travellers, spending by non-European tourists declined more sharply than European travellers, but their rebound has been impressive.
  • Visitors from outside the region drove double-digit growth in spending across every market in 2010 compared to 2009, taking them back to 2008 absolute spending levels. On average they spend 88 percent more per trip than European tourists.

Luxury is back in a big way

  • In a positive sign for the European economy, there has been significant growth in spending at luxury (5 star) hotels. On average, spending at luxury hotels grew by 9 percent across all markets in 2010, while spending at upscale (4 star) and midscale (3 star and below) hotels only grew at 3 percent and 2 percent respectively. In the UK, both luxury (10 percent) and midscale (7 percent) are seeing strong growth.

Business travel increases across Europe

  • The importance of business spending to the sector can’t be underestimated. Business travellers currently represent one third of all travellers across Europe and almost 50 percent of travellers in Germany. In 2010 spending by business travellers increased by 10 percent across Europe, with a further 4 percent growth in the first quarter of this year. This was largely driven by an increase in the number of travellers, rather than an increase in average spending.
  • “While not yet back to pre-downturn levels, business spending in hotels dropped off more slowly and rebounded more quickly, showing how vital business travellers are to the hotel industry,” noted Bhatia. “We are watching with interest to see if the virtual management strategies adopted in the downturn will have a lasting impact on business travel.”

Generation Y has a taste for luxury

  • Generation Y travellers (those in their 20s) represent an interesting emerging target market for hoteliers, says Bhatia. “While the Gen Y traveller represents a relatively small segment, they largely defied the downturn, their wallets are growing and they already exhibit the behaviour of premium spenders.”
  • Generation Y travellers are spending 20 percent more on lodging today than they were before the downturn and, in the first three months of this year, they spent 24 percent more on hotels compared to the same period last year. More than half of Generation Y travellers stayed in a luxury or midscale hotel. Their most popular destination choices were the UK, France, and Italy.

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Questions from the audience:

American Express is traditionally viewed as being in the higher end of the market – how accurate is the research to the broader market?

“It’s true that American Express cardmembers are generally more affluent, however in the last few years we have significantly grown our base and we see spending right across the spectrum. Our insights are based on millions of actual purchasing decisions, not a panel or a survey, and we have controlled the data to ensure it reflects changes in spending and not changes in our card base. And, of course, our customers tend to be frequent travellers. So we are absolutely confident that our data is relevant.

Where are visitors to Europe coming from, if not domestic travellers?

“North America is a traditional feeder market, but there is also growth in the BRIC nations, the Middle East and Australia, the latter may well be correlated to the beneficial exchange rate. Visitors from outside Europe are increasing their average spend across all industries (hotels & dining).”

What is the split in customer spending in London versus the provinces and the UK versus the continent?

“London is growing significantly faster than the provinces, with Scotland coming in second in terms of spend growth year on year. Hotels are benefitting – especially in the luxury sector as non-European travellers return to Europe & London. The UK, Italy and France are growing the fastest.”

How is the conference and banqueting market faring? Are things improving there?

“While we didn’t look at this part of the industry specifically, we have seen particularly strong growth in business travel, which is a good sign for the conference sector..”

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