Prague, 10 June 2009 1 The financial / economic crisis and the hospitality industry by Ákos Niklai Member of the HOTREC Executive Committee

Prague, 10 June 20091

The financial / economic crisis and the hospitality industry

by Ákos Niklai

Member of the HOTREC Executive Committee

22

Contents

I. Brief introduction to HOTREC

II. The crisis and the hospitality industry

III. Some data

IV. Recovery at EU level

V. Recovery at national level

VI. Conclusions


33

Represents

hospitality industry at European level

40 National Associations

in 25 European countries

I. Brief introduction to HOTREC


44

European hospitality sector

1.6 million enterprises

9 million persons employed automotive production + sales + servicing: 6.3 million agriculture: 10 million

163 billion EUR value added chemical sector 170 billion EUR

I. Brief introduction to HOTREC (cont’d)


55

European hospitality sector

99% of enterprises employ < 50 people

these 99% make up 62% of value added

92% of enterprises employ < 10 people

I. Brief introduction to HOTREC (cont’d)


66

II. The crisis and the hospitality industryIn a nutshell:

Crisis combined with confidence

Direct impact on industry

business travels business events (congress, seminars...) private trips/outings search for cheaper prices cost of credit

77

European economy (EUROSTAT)III. Some data

GDP: 1st quarter ‘09 compared to 4th quarter ‘08 to 1st quarter ‘09

in EU 27 by 2,5% by 4,4%

in Euro area by 2,5% by 4,6%

Unemployment (March ’08 – March ’09)

in EU27 from 6,7% to 8,3%

in Euro area from 7,2% to 8,9%


88

Confidence in the European economy(European Commission)

III. Some data (cont’d)

Economic Sentiment Indicator (ESI)(Feb ’09 - April ’09)

ESI by 0,6 points in EU27 (at 60,3 pts in March)

by 3,5 points in EU27 (at 63,9 pts in April)

(long term average =100 points)

Indicator increasing for the first time over 2 years


99

UNWTO World Tourism Barometer

International tourist arrivals WorldEurope

On average between 2004 and 2007 +7% < 5,0%January to June 2008 +5,7% +3,4%June to December 2008 -1,7% -2,8%In 2008 (thanks to 6 first months!) +1,7% +0,0%

Europe with worst performance in 2008!



1010


International tourist arrivals WorldEurope

On average between 2004 and 2007 +7% < 5,0%

January 2008 – January 2009 -6,6% -5,4%February 2008 – February 2009 -8,8% -11,2%



1111


Prospects for 2009 (as of January 2009 – still maintained)

for the world for Europe

stagnation stagnation

or slight decline (-1% to -2%) or -3%



1212


Occupancy: 69,3% (2007) down to 66,9% (2008)

- most affected: Prague, Rome, Dublin (~ -9,5%)

- no European capital in +

Average room rate: stagnation

RevPAR: -4,2%


Hotel performance in EU (2008)

1313

European Travel Commission

Hotel performance in EU

January – February 2009 (vs. same period 2008)

Occupancy 10%

Average daily rate 10%

RevPAR 20%



1414

Hotel performance in EU

April 2008 – April 2009

Occupancy rate 68,9% 59,4%

Average daily rate 15%

RevPAR 27%



1515

Reports by some associations

Budapest first 3 months in 2009 (vs. same period 2008)

Room nights 20%

Revenue 30%

RevPAR (5* ) 40%

Restaurant revenue 40%



1616

Prague first 3 months in 2009 (vs. same period 2008)

Room occupancy 18% ( at 39%)

RevPAR 20-30%

Situation of restaurants: 30% to close down in ’09-’10




1717

France - hotels: (Jan ’08 – Jan ’09)

Occupancy 3,3%

Restaurants:

Turnover 20-50% (depending on region)




1818

Spain hotels

Occupancy 15%

RevPAR 20%




1919

Spain restaurants

Employment 60.000 jobs lost over12 months

Rev. (Jan’08 – Jan’09) 5,2%

Rev. (Feb’08 – Feb’09) 9,7%




2020

Portugal

Rev. (Jan, Feb ’08 – Jan, Feb ’09) 5,2%

Nights (Jan, Feb’08 – Jan, Feb’09) 9,7%

Prediction for 2009: 10-20%




2121

Ireland

Occupancy 2007 2009 (forecast)

64% 54%




2222


EUROBAROMETER survey (20 March 2009)

On holiday plans of consumers

• 27 000 consumers interviewed

• in February 2009

• in the 27 EU countries


2323


EUROBAROMETER survey

On holiday plans of consumers Main results:

• Impact of changes in cost of living on holiday plans- 1/3 some impact on holiday plans (out of which for 38% this meaning not to take holidays at all)- 1/3 no impact- 1/4 no change in cost of living (the rest: no answer)

• Where to save?- 15% would save on accommodation - 23% would go rather in low season- 23% would save on restaurant spending (30% on shopping)


2424

IV. Getting out of the crisis

How soon ?

3 possible scenarios

VorUorLPrague, 10 June 2009

2525

IV. Recovery at EU level

“Yes, Europe has the unity, the confidence and determination to win this battle”

Commission President José Manuel Barroso


2626

IV. Recovery at EU level (cont’d)

Succession of meetings of EU heads of State or government since October

3 main lines of actions: promoting financial stability in order to re-build confidence getting the real economy back on track staying united against the crisis and working together at global level

2 levels: EU national

2727


Example of general measure

European Investment Bank

€ 30 bn available for loans to SMEs

via commercial banks

at favourable interest rates


2828


Example of measure specific for the hospitality industry

Change in VAT rate system – came into effect on 1 June 2009!

All Member States are allowed to applya reduced VAT rate to restaurant services

(before only 11 of them were allowed to do so)


2929

Responses to crisis vary greatly!

V. Recovery at national level


3030

V. Recovery at national levelVAT – good examples

• from 17,5 to 15% in general (UK)

• from 19% to 9% on restaurant services (CZ)?

• from 19,6 to 5,5% on restaurant services (FR)?

• from 21% to 6% on restaurant services (BE)?


3131

V. Recovery at national levelVAT – bad examples

• from 5% to 9% on hotels (Estonia)

• from 5% to 19% on hotels (Lithuania)

• from 5% to 21% on hotels (Latvia)

• from 20% to 25% on hotels and restaurants (Hungary)


3232

V. Recovery at national levelVAT rates for hotels on 1 January 2008


VAT rates for hotels in EU-27 as of 1 January 200822 Member States applied a reduced VAT rate

3

5 5 5 5 5 5.5 6 6 7 7 7

8 8 8.5 9 9 9 10 10

12 13.5

17.5 19 19

20

25

0

15

LU EE

LT

LV

MT PT FR BE

NL

BG ES

PL CY FI SI CZ EL

RO

AT IT SE IE UK DE

SK HU

DK

3333

V. Recovery at national levelVAT rates for hotels on 1 July 2009?


VAT rates for hotels in EU-27 as of 1 July 2009??? (vs. 1 January 2008)20 Member States to apply a reduced VAT rate?

3

9

19

21

5 5 5.5 6 6 7 7 7

8 8 8.5 9 9 9 10 10

12 13.5 15

19 19

25 25

0

15

LU EE

LT

LV

MT PT FR BE

NL

BG ES

PL CY FI SI CZ EL

RO

AT IT SE IE UK DE

SK HU

DK

3434

V. Recovery at national levelVAT rates for restaurants on 1 January 2008


VAT rates for restaurants in EU-27 as of 1 January 200811 Member States applied a reduced VAT rate

3

6 7 7

8 8.5 9 10 10

12 13.5

17.5 18 18 18 18 19 19 19 19 19

.6 20 20

21

22

25 25

0

15

LU

NL ES

PL CY SI EL

AT IT PT IE UK EE

LT

LV

MT

CZ

DE

RO

SK FR BG

HU BE FI DK SE

3535

V. Recovery at national levelVAT rates for restaurants on 1 July 2009?


VAT rates for restaurants in EU 27 as of 1 J uly 2009??? (vs. 1 J anuary 2008)14 Member States to apply a reduced VAT rate?

3

6

7 7

8 8.5 9 10 10

12 13.5

15

18

19

21

18

9

19 19 19

5.5

20

25

6

22

25 25

0

15

LU

NL ES

PL CY SI EL

AT IT PT IE UK EE

LT

LV

MT

CZ

DE

RO

SK FR BG

HU BE FI DK SE

3636

V. Recovery at national levelOther measures

• Increase in budget for marketing (e.g. Prague, Austria, Greece)

• Subsidised credit for the industry (e.g. Austria, Portugal, Spain)

• Abolishment of the bed-tax, special support for seasonal hotel enterprises, reduction of the landing fees (Greece)


3737

EU and 27 Member States are to create the conditions for

economy to recover growth to florish employment to redeploy

Survival of the 1.6 million enterprises as well as the future of 9 million employees are at stake

Overall objective of the industry


VI. Conclusions

3838

• New European Parliament

• New European Commission

Strengthened recovery plan? Need of:

• further facilitation of credit for businesses• reduction of charges to businesses• creative solutions for keeping/increasing skills


VI. Conclusions (cont’d)

3939

Thank you for your kind attention!

www.hotrec.eu

http://www.hotrec.eu/

Documents

Prague, 10 June 2009 1 The financial / economic crisis and the hospitality industry by Ákos Niklai Member of the HOTREC Executive Committee