With the coronavirus decimating the hotel and hospitality industry, last week saw three prominent hotels being administered last rites as losses throughout the sector continue to spiral. Among the biggest names announcing their imminent closedown are the Hessischer Hof in Frankfurt, the Hotel Anna in Munich and the Swissotel in Zürich.
Ursula Kriegl, hotel expert at consultants EY, says: “The situation in the sector is now explosive, with nobody able to say right now just how this is going to continue…Even if hotels are slowly beginning to open their doors, they’re still a long way from operating profitably. There are going to be insolvencies.”
Investment companies that have been investing in the sector are also caught up in the maelstrom. The Vienna-based UBM Development, one of Europe’s leading hotel developers said last week that of the 16 projects it had in the pipeline at the beginning of the year, seven are currently under construction, while the rest have been mothballed or re-purposed. A hotel for the Leonardo Gruppe in Frankfurt, for example, is being re-modelled into an office and residential building. UBM boss Thomas Winkler said, “At the moment there is simply no demand for hotel projects at reasonable prices. It’s a time for bargain-hunters, and it’s going to be a long, rocky path back.”
Meanwhile, Germany’s Federal Competence Center for Tourism is working on the principle that international tourism turnover will not reach the 2019 level again until 2023 at the earliest. According to industry specialist STR Global, the occupancy rate of the almost 11,000 hotels in Germany was 15% in this year’s second quarter. This is likely to become a problem for German banks in particular, as they are the most active in European commercial real estate financing.
They still appear to be breathing (relatively) easily over at Aareal Bank in Wiesbaden, where the bank has a high exposure (€8.7bn) to the hotel sector, and whose share price has been hit heavily since the lockdown. Board member Christof Winkelmann said recently that the lending was highly secured, minimizing risk for the bank, and loan defaults are no higher than at the beginning of the year. The new focus of bank lending in any event, he said, had shifted to lending to the logistics sector.
A truly gloomy prognosis was given last week by Thomas Lengfelder, head of the Berlin branch of DEHOGA, Germany’s leading hotel and restaurant association, who said he saw no light at the end of the tunnel. “It is worse than any fears I may have had, or that I dare even express. If it goes on like this, we’re heading here into a wave of insolvencies.”
Lengfelder cited figures showing that the turnover per room (RevPar) in Berlin in September (normally one of the strongest months) was €31.60, as against €115.30 at the same time last year, a fall of 72.6%. He said he hoped for slightly better figures in October, before falling off in the cold wet months of winter, devoid this year of all trade fairs, conferences, seminars, and office parties. “This is heading even further downwards by the end of the year. I doubt how seriously anyone is really aware of this – and certainly not the politicians.”
