Report Forecasts European Hotel Growth Grinding To A Halt

Hotel chain development in Europe will stagnate this year, with several major hoteliers on the continent already scaling back expansion plans, consulting and research firm MKG Group said in a report released today.

European chain room supply growth at the beginning of the year stood at 2.9 percent, according to the report. Development skewed toward the economy and midprice tiers, with upscale development just below the average at 2.5 percent. As projects that were underway before the economic downturn are completed, however, the development rate will drop.

"From now on and throughout the next year or so, caution will be the key word," MKG Hospitality director of development Vanguelis Panayotis said in a statement. "It is very likely that the current crisis will be visible in hotel supply in the years to come. There are already less projects in the pipeline."

Accor, Europe's largest hotel group in terms of supply, has postponed its plans to develop 200,000 new rooms, pushing its target date to 2011 from 2010, according to the report. Madrid-based NH Hotels also has pulled back on expansion plans, cutting financial investment by limiting development to management and leasing agreements. Similarly, Majorcan hotel company Sol Melia has halved its investment growth to €100 million from €200 million, the report indicated.

Some companies still have aggressive growth plans in Europe, however. Largely through development of its Holiday Inn Express brand and upscale Crowne Plaza brand, InterContinental Hotels Group overtook Best Western as the second-largest hotel company in terms of rooms in Europe. Brussels-based Rezidor, which operates Carlson Hotels Worldwide's brands in Europe, has more than 100 hotels and 22,000 rooms under development, which ultimately will bring its total rooms in Europe close to the levels of IHG and Accor, according to MKG Hospitality.

Chain penetration in Europe remains far below that of North America, which still leaves development potential, particularly in Central and Eastern Europe, Panayotis said.