Hotels: most visible impact from Covid-19
The consequences of Covid-19 have been felt the most in the hotel sector. The final quarter of 2019 was excellent, but investment volumes proved disappointing in Q1.
Almost all hotels in the Netherlands are closed or have only very low occupancy. Average occupancy has fallen to less than 10%. As a result, average profit per room fell by more than a quarter in Q1 2020, compared to the same period in 2019. The strongest fall was in Amsterdam (-30.5%) and Utrecht (-28.5%), according to figures from STR. Many real estate owners have agreed to hotels being closed and payments postponed. Many owners are in negotiations with banks and lenders to revise or defer their payment arrangements. On a positive note, we are seeing a willingness to cooperate and show flexibility in this area.
Very slow recovery
The problems in the hotel sector are very likely to persist for longer than those in other sectors. International bookings will continue to stay low as a result of restrictions on travel. Business hotel stays will increase only very gradually and conferences will be postponed, cancelled or will go ahead in a different, virtual format. The earliest improvement will become visible when there is a slight increase in national and European tourism, but there is great uncertainty as to when this might happen.
Benefits for Amsterdam
In this situation, the imposed restrictions on new developments in Amsterdam is actually beneficial, since the market recovery will not be inhibited by new supply reaching the market. However, we do expect this to be a potential problem in Rotterdam. According to a recent CBRE analysis, Amsterdam is one of the top cities that are positioned for a relatively rapid market recovery. This is because the hotel market in Amsterdam relies primarily on interregional tourism and less on conferences. This means that the market will recover relatively rapidly as soon as Dutch and European coronavirus measures are relaxed.
The problems in the hotel sector are very likely to persist for longer than those in other sectors. The earliest improvement will become visible when there is a slight increase in national and European tourism, but there is great uncertainty as to when this might happen.