The Netherlands hotel market is continuing to suffer while Belgium and Luxembourg are starting to see a recovery. RevPAR has fallen by 0.9% during the first eight months of 2004 due to continued weak economic performance as well as a drop in demand from corporate and key source markets such as Germany, North America and the UK. RevPAR in the Netherlands is now 14% lower than it was two years ago. However, the good news is that the economy is starting to show signs of improvement. According to the Economist Intelligence Unit (EIU), gross domestic product (GDP) is expected to grow by 1.4% in 2004 and 2.0% in 2005.

Belgium and Luxembourg leading the way

The Belgium and Luxembourg hotel market are both showing signs of recovery, recording an increase in revPAR performance of 3.3% and 5.9%, for the first eight months of this year compared to 2003. This increase in revPAR has been driven by improved occupancy as hoteliers continue to keep room rates low to boost demand.

In Belgium, corporate demand is starting to come back. This has been helped by the launch of the new Belgium airline SN Brussels. In 2001 and 2002 the Belgium market suffered in the wake of the collapse of Sabena, the former national airline, at the end of 2001. This had an impact on the number of corporate travellers to Brussels and through the airport at Zaventum. Although performance has recovered slightly during the first eight months of 2004, the Belgium hotel market is still 3% behind 2002 levels.

Luxembourg, with its small population of just 451,000, has witnessed an economic recovery this year after the slowdown at the beginning of 2000. Luxembourg is highly dependent on corporate business from the financial sector and EU institutes. Increasing financial activities in the country and the introduction of 10 new EU members in May have both helped improve hotel performance by 5.9% during the first eight months of 2004. This positive trend is likely to continue in 2005 as Luxembourg will take over the European presidency during the first half of the year. However, over the next few years, Luxembourg�s supply is set to increase by 10% with the addition of 700-rooms by 2007. The majority of these rooms will be built in the city itself which will naturally have an impact on hotel performance in the longer-term.

Following in the footsteps of nations

Unsurprisingly, the same trend can be seen when comparing city results with country results across the Benelux region (see table below), with most cities located outside the Netherlands showing positive revPAR growth.

In Belgium, Antwerp reported the highest revPAR growth of any city in the Benelux area, with a 6.6% increase during the first eight months in 2004. This growth is partly due to increased demand from General Motors, which generated 6,000 additional room nights during the first months of the year.

Ghent on the other hand, witnessed a 3.3% decrease in revPAR driven by a 4.1% fall in occupancy levels. This is partly the result of new supply in the city from the new Ghent River Hotel (70-rooms) which opened early 2004 and the addition of 35-rooms to the Holiday Inn Expo. Brussels saw revPAR increase by 3.6% driven by occupancy levels instead of average room rates due to an increase in corporate demand.

Both Amsterdam and Rotterdam recorded a drop in revPAR of 0.9% and 4.6 % during the first eight months of 2004 to €91 and €54 respectively. Amsterdam is struggling to sustain demand from the corporate market and has lost business from the conference and incentive market to cheaper destinations. Although revPAR has fallen, hoteliers are still managing to achieve the highest revPAR of any city in the Benelux region. Rotterdam hoteliers depend mostly on corporate demand from the harbour which has stagnated this year, resulting in negative hotel performance.

The only city in the Netherlands which reported positive revPAR growth during the first eight months of the year was Den Haag, with a marginal increase of 1.2%. The city has benefited from the Netherlands hosting the EU presidency during the second half of 2004 and increased business from the �International Crime Tribunal of the Former Yugoslavia� at the International Criminal Court.

A trend set to continue�.

The challenge for hoteliers across Benelux is to ensure rate integrity in order that they can take advantage of any recovery in demand. However, the current high price of oil will continue to put pressure on the European economy and potentially threaten the recovery in Benelux. Looking to the rest of this year, the Netherlands hotel market is likely to remain under pressure due to difficult trading conditions however Belgium and Luxembourg are expected to continue to show stable results.

Notes: All analysis in Euros.

The HotelBenchmark Survey contains the largest independent source of hotel performance data outside of North America and tracks the performance of over 6,000 hotels and 1.2 million rooms every month.