Do more beds bring in more guests?
Dr. Vladimir Preveden and Marietta Babos (Roland Berger)
Austria is one of the world's top tourist destinations. According to the World Economic Forum, the alpine republic is second in the world in terms of its attractiveness to tourists. The tourism sector consistently accounts for over 15% of GDP, and during the 2009 crisis was able to even gain market share. The positive mood is reflected in the plans made by tourism executives – another 16,000 hotel beds are planned over the next five years. But do more beds really bring in more guests, or do they lead to price wars that endanger the economic viability of the hospitality industry? This was the question examined by the study "Do more beds bring in more guests?", conducted together with the Austrian Hotel Association (ÖHV). The results of the study were presented by study author Dr. Vladimir Preveden to the ÖHV Hotelier Congress at Europahaus Mayrhofen in Zillertal, Austria.
Cutthroat competition in domestic top-quality hotels
The tough international competition of the past few years has led to a refinement of the first-class offers in Austria. The number of beds in quality lodgings (5- and 4-star operations) has grown by more than 30% over the past decade – and another 9% is forecast for 2010-2013. At the same time, competitors such as Switzerland and Italy are offering the same quality at prices that are 26% higher. These factors indicate an excess supply of beds in the top segment.
In some Austrian states and destinations, the cutthroat competition resulting from the increase in beds is already leading to significant declines in occupancy and price. In many places, the already low prices of 2009 can no longer be maintained. Many 5- and 4-star operations are already at the limits of economic viability: long payback periods and too-low equity ratios are clear indicators that their existence is in jeopardy.
Hope from the foreign markets
The situation is not expected to improve in the foreseeable future. Quite the contrary: supply and demand will diverge even more dramatically in 2015. Moreover, the World Economic Forum's forecast for Austria predicts shorter stays, later bookings and a tendency toward lower prices. Only the foreign markets can breathe new life into the top hospitality segment; Central and Eastern Europe in particular still have untapped potential. It remains to be seen, however, if Austria's current tourism budget (Österreich Werbung) will be enough to target new foreign visitors.
More beds, therefore, do not necessarily result in more guests. For this reason, decision makers must focus more on foreign markets, since that's where the purchasing power is. This would go a long way toward utilizing existing and future capacity while financially supporting the domestic hotel industry.
Cutthroat competition in domestic top-quality hotels
The tough international competition of the past few years has led to a refinement of the first-class offers in Austria. The number of beds in quality lodgings (5- and 4-star operations) has grown by more than 30% over the past decade – and another 9% is forecast for 2010-2013. At the same time, competitors such as Switzerland and Italy are offering the same quality at prices that are 26% higher. These factors indicate an excess supply of beds in the top segment.
In some Austrian states and destinations, the cutthroat competition resulting from the increase in beds is already leading to significant declines in occupancy and price. In many places, the already low prices of 2009 can no longer be maintained. Many 5- and 4-star operations are already at the limits of economic viability: long payback periods and too-low equity ratios are clear indicators that their existence is in jeopardy.
Hope from the foreign markets
The situation is not expected to improve in the foreseeable future. Quite the contrary: supply and demand will diverge even more dramatically in 2015. Moreover, the World Economic Forum's forecast for Austria predicts shorter stays, later bookings and a tendency toward lower prices. Only the foreign markets can breathe new life into the top hospitality segment; Central and Eastern Europe in particular still have untapped potential. It remains to be seen, however, if Austria's current tourism budget (Österreich Werbung) will be enough to target new foreign visitors.
More beds, therefore, do not necessarily result in more guests. For this reason, decision makers must focus more on foreign markets, since that's where the purchasing power is. This would go a long way toward utilizing existing and future capacity while financially supporting the domestic hotel industry.
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