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Living La Dolce Vita?
Words: Matt Turner
Italy’s hotel sector is undergoing a renaissance, with world class hotels opening their doors throughout the country. It is also weathering the recession better than most in performance terms, but there are still serious structural issues to face finds Matt Turner.
REVIEWS
Italy’s hotel market has done better than most in the current recession. “Growth is back,” proclaimed Marco Malacrida, Director Italy for STR Global, of figures for August 2009 which showed three Italian cities – Florence, Rome and Venice – post year-over-year, double-digit increases in occupancy compared with the same period last year. Italy as a whole showed a 4.6% increase in occupancy for the same timeframe – a good performance compared with the falls in occupancy experienced in Germany, Russia, Spain and the UK, according to the same set of figures. But as STR Global note, these recent improvements need to be considered “in a national and regional context.” The performance for Italy year-to-date August 2009 shows a year-on-year percentage change in revPAR of -18.1%. Not quite as bad as Europe’s 19.4% decrease, but not good either. The table on the left gives a more detailed city-by-city breakdown of recent performance.
Underlying these figures, the Italian hotel market still faces serious structural challenges. This is one of the most fragmented markets in Europe in terms of ownership, branding and regional differences. Most hotels are still privately owned by their operators, often families who have owned the property for generations but do not have access to the capital to develop or refurbish them. Transactions tend to be driven by domestic dealmaking rather than foreign investment. “The characteristic feature of the Italian hotels market is that has the lowest level of brand concentration of any country in Europe,” says Paul Slattery of Otus & Co. “Only about 8% of the hotels in Italy are affiliated with chains compared to 57% in the UK.”
New hotel development in Italy is not easy either. Projects can be hampered by bureaucracy in planning and construction, not to mention the stagnant economy of a country which has often been dubbed “the sick man of Europe.” As a result, new hotels have been in short supply in recent years and investment in existing properties has been low. Even so, international operators – notably Hilton, who have identified its potential for growth – have increased their presence in Italy over the past fifteen years.
Italy may be economically poor in relation to other West European countries but it is hard to think of a country which is more rich in terms of art, culture, design, food and architecture. Despite the difficulties outlined earlier, the last twelve months have seen the launch of several high profile projects which combine the best Italy has to offer in all these areas. Even if performance is mixed, the quality of the properties we review over the next few pages shows the Italian hotel market is undergoing a renaissance of sorts.
