The financial economic crisis and the hospitality

The financial / economic crisis and the hospitality industry by Ákos Niklai Member of the HOTREC Executive Committee Prague, 10 June 2009 1

Contents I. Brief introduction to HOTREC II. The crisis and the hospitality industry III. Some data IV. Recovery at EU level V. Recovery at national level VI. Conclusions Prague, 10 June 2009 2

I. Brief introduction to HOTREC Ø Represents hospitality industry at European level Ø 40 National Associations Ø in 25 European countries Prague, 10 June 2009 3

I. Brief introduction to HOTREC (cont’d) European hospitality sector § 1. 6 million enterprises § 9 million persons employed automotive production + sales + servicing: 6. 3 million agriculture: 10 million § 163 billion EUR value added chemical sector 170 billion EUR Prague, 10 June 2009 4

I. Brief introduction to HOTREC (cont’d) European hospitality sector § 99% of enterprises employ < 50 people § these 99% make up 62% of value added § 92% of enterprises employ < 10 people Prague, 10 June 2009 5

II. The crisis and the hospitality industry In a nutshell: Crisis combined with confidence Direct impact on industry § § § business travels business events (congress, seminars. . . ) private trips/outings search for cheaper prices cost of credit 6

III. Some data European economy (EUROSTAT) GDP: 1 st quarter ‘ 09 compared in EU 27 in Euro area to 4 th quarter ‘ 08 to 1 st quarter ‘ 09 by 2, 5% by 4, 4% by 4, 6% Unemployment (March ’ 08 – March ’ 09) in EU 27 from 6, 7% to 8, 3% in Euro area from 7, 2% to 8, 9% Prague, 10 June 2009 7

III. Some data (cont’d) Confidence in the European economy (European Commission) Economic Sentiment Indicator (ESI) (Feb ’ 09 - April ’ 09) ESI by 0, 6 points in EU 27 (at 60, 3 pts in March) by 3, 5 points in EU 27 (at 63, 9 pts in April) (long term average =100 points) Indicator increasing for the first time over 2 years Prague, 10 June 2009 8

III. Some data (cont’d) UNWTO World Tourism Barometer International tourist arrivals World. Europe On average between 2004 and 2007 January to June 2008 June to December 2008 In 2008 (thanks to 6 first months!) +7% < 5, 0% +5, 7% +3, 4% -1, 7% -2, 8% +1, 7% +0, 0% Europe with worst performance in 2008! Prague, 10 June 2009 9

III. Some data (cont’d) UNWTO World Tourism Barometer International tourist arrivals World. Europe On average between 2004 and 2007 +7% January 2008 – January 2009 February 2008 – February 2009 -6, 6% -5, 4% -8, 8% -11, 2% Prague, 10 June 2009 < 5, 0% 10

III. Some data (cont’d) UNWTO World Tourism Barometer Prospects for 2009 (as of January 2009 – still maintained) for the world for Europe § stagnation § or slight decline (-1% to -2%) Prague, 10 June 2009 or -3% 11

III. Some data (cont’d) Hotel performance in EU (2008) § Occupancy: 69, 3% (2007) down to 66, 9% (2008) - most affected: Prague, Rome, Dublin (~ -9, 5%) - no European capital in + § Average room rate: stagnation § Rev. PAR: -4, 2% Prague, 10 June 2009 12

III. Some data (cont’d) European Travel Commission Hotel performance in EU January – February 2009 (vs. same period 2008) Occupancy 10% Average daily rate 10% Rev. PAR 20% Prague, 10 June 2009 13

III. Some data (cont’d) Hotel performance in EU April 2008 – April 2009 Occupancy rate 68, 9% 59, 4% Average daily rate 15% Rev. PAR 27% Prague, 10 June 2009 14

III. Some data (cont’d) Reports by some associations Budapest first 3 months in 2009 (vs. same period 2008) Room nights 20% Revenue 30% Rev. PAR (5* ) 40% Restaurant revenue 40% Prague, 10 June 2009 15

III. Some data (cont’d) Reports by some associations Prague first 3 months in 2009 (vs. same period 2008) Room occupancy Rev. PAR 18% ( at 39%) 20 -30% Situation of restaurants: 30% to close down in ’ 09 -’ 10 Prague, 10 June 2009 16

III. Some data (cont’d) Reports by some associations France - hotels: (Jan ’ 08 – Jan ’ 09) Occupancy 3, 3% Restaurants: Turnover 20 -50% (depending on region) Prague, 10 June 2009 17

III. Some data (cont’d) Reports by some associations Spain hotels Occupancy 15% Rev. PAR 20% Prague, 10 June 2009 18

III. Some data (cont’d) Reports by some associations Spain restaurants Employment 60. 000 jobs lost over 12 months Rev. (Jan’ 08 – Jan’ 09) 5, 2% Rev. (Feb’ 08 – Feb’ 09) 9, 7% Prague, 10 June 2009 19

III. Some data (cont’d) Reports by some associations Portugal Rev. (Jan, Feb ’ 08 – Jan, Feb ’ 09) 5, 2% Nights (Jan, Feb’ 08 – Jan, Feb’ 09) 9, 7% Prediction for 2009: 10 -20% Prague, 10 June 2009 20

III. Some data (cont’d) Reports by some associations Ireland Occupancy 2007 2009 (forecast) 64% 54% Prague, 10 June 2009 21

III. Some data (cont’d) EUROBAROMETER survey (20 March 2009) On holiday plans of consumers • 27 000 consumers interviewed • in February 2009 • in the 27 EU countries Prague, 10 June 2009 22

III. Some data (cont’d) EUROBAROMETER survey On holiday plans of consumers Main results: • Impact of changes in cost of living on holiday plans - 1/3 some impact on holiday plans (out of which for 38% this meaning not to take holidays at all) - 1/3 no impact - 1/4 no change in cost of living (the rest: no answer) • Where to save? - 15% would save on accommodation - 23% would go rather in low season - 23% would save on restaurant spending (30% on shopping) Prague, 10 June 2009 23

IV. Getting out of the crisis How soon ? 3 possible scenarios VUL or or Prague, 10 June 2009 24

IV. Recovery at EU level “Yes, Europe has the unity, the confidence and determination to win this battle” Commission President José Manuel Barroso Prague, 10 June 2009 25

IV. Recovery at EU level (cont’d) § Succession of meetings of EU heads of State or government since October § 3 main lines of actions: Ø promoting financial stability in order to re-build confidence Ø getting the real economy back on track Ø staying united against the crisis and working together at global level § 2 levels: Ø EU Ø national 26

IV. Recovery at EU level (cont’d) Example of general measure § European Investment Bank € 30 bn available for loans to SMEs via commercial banks at favourable interest rates Prague, 10 June 2009 27

IV. Recovery at EU level (cont’d) Example of measure specific for the hospitality industry § Change in VAT rate system – came into effect on 1 June 2009! All Member States are allowed to apply a reduced VAT rate to restaurant services (before only 11 of them were allowed to do so) Prague, 10 June 2009 28

V. Recovery at national level Responses to crisis vary greatly! Prague, 10 June 2009 29

V. Recovery at national level VAT – good examples • from 17, 5 to 15% in general (UK) • from 19% to 9% on restaurant services (CZ)? • from 19, 6 to 5, 5% on restaurant services (FR)? • from 21% to 6% on restaurant services (BE)? Prague, 10 June 2009 30

V. Recovery at national level VAT – bad examples • from 5% to 9% on hotels (Estonia) • from 5% to 19% on hotels (Lithuania) • from 5% to 21% on hotels (Latvia) • from 20% to 25% on hotels and restaurants (Hungary) Prague, 10 June 2009 31

V. Recovery at national level VAT rates for hotels on 1 January 2008 Prague, 10 June 2009 32

V. Recovery at national level VAT rates for hotels on 1 July 2009? Prague, 10 June 2009 33

V. Recovery at national level VAT rates for restaurants on 1 January 2008 Prague, 10 June 2009 34

V. Recovery at national level VAT rates for restaurants on 1 July 2009? Prague, 10 June 2009 35

V. Recovery at national level Other measures • Increase in budget for marketing (e. g. Prague, Austria, Greece) • Subsidised credit for the industry (e. g. Austria, Portugal, Spain) • Abolishment of the bed-tax, special support for seasonal hotel enterprises, reduction of the landing fees (Greece) Prague, 10 June 2009 36

VI. Conclusions Overall objective of the industry EU and 27 Member States are to create the conditions for § economy to recover § growth to florish § employment to redeploy Survival of the 1. 6 million enterprises as well as the future of 9 million employees are at stake Prague, 10 June 2009 37

VI. Conclusions (cont’d) • New European Parliament • New European Commission Strengthened recovery plan? Need of: • further facilitation of credit for businesses • reduction of charges to businesses • creative solutions for keeping/increasing skills Prague, 10 June 2009 38

Thank you for your kind attention! www. hotrec. eu 39