Strong Dollar Boosts U.S.-Owned European Hotels

The biggest U.S. hotel companies began pushing into Europe during the downturn in the wake of the financial crisis, seeing an opportunity to export their famous brands to small, independent operators struggling to fill rooms.

Now that the euro is plunging against the dollar, those plans are looking fortuitous.

In previous years, a strong dollar would have offered little upside for big U.S. hospitality companies, which historically have been underrepresented in European regions long dominated by independent hotels.

But because of their move into Europe, U.S. companies now are poised to capitalize on any increase in travel to the Continent by U.S. visitors whose dollars go a lot farther than they did last year.

In the past 10 months, the dollar has gained about 30% versus the euro, recently touching an 12-year high against the currency used by 19 European countries., the hotel booking website and unit of Expedia Inc., says it is seeing a rise in U.S. customer interest for European travel. Room searches in the fourth quarter for Paris were up 31% compared with the year-earlier period. Searches for Rome were up 41%, the company said.

Some U.S. business travelers say the cheap euro makes it compelling to add extra personal days onto work trips. Mark Jeffries, a Boston-based convention moderator and speaker, says he has a work trip next month in Rome. His wife is flying out for three more nights when the convention is over.

“I’m definitely extending trips when I get to Europe,” Mr. Jeffries says. “I can tack on leisure time at end of a business trip, when in the past I would not.”

The Blackstone Group purchased the Concorde Opera hotel in Paris and converted the independent brand to a Hilton, which is owned by the investment firm. PHOTO: CONCORDE HOTELS & RESORTS

A strong dollar isn’t all good news for the U.S. hotel companies. If the euro continues to weaken, some of the benefits of stronger business will be offset when the local earnings are translated back into dollars, though analysts say that is unlikely to offset all the gains.

What is more, Europeans and other foreign travelers will feel the crunch of a weak currency and might stay away from U.S. cities where U.S. operators get the bulk of their revenue. New York already is feeling some of the pain of a stronger U.S. dollar, with revenue per available room down 6.7% in the first quarter compared with last year.

The Wall Street Journal Dollar Index, which tracks the greenback against a basket of its counterparts, is up 22% over the past 10 months.

But with U.S. markets largely saturated, hotel operators say the bulk of their growth in coming years will be abroad. While China, India and other emerging markets offer hope for the future, Europe’s large traveling class and numerous historic sights make it the critical market today.

“Europe as a destination has a huge amount of growth left in it, from other parts of the world, but also from within Europe,” says Patrick Fitzgibbon, Hilton’s senior vice president of development for Europe and Africa.

In the U.S., analysts say, about two-thirds of hotel rooms are controlled by major brands, with the remainder accounted for by independents. In Europe, the ratio is the reverse.

For Hilton Worldwide Holdings Inc., 2014 was its biggest year ever for European openings, with 34 new properties and 7,700 rooms, the most of any U.S. brand, a spokesman said. Hilton has a current pipeline in Europe of 30,000 rooms, which analysts expect to come online over the next three years.

Starwood Hotels & Resorts, meanwhile, says its 19 agreements for new hotels in Europe last year represented its highest number of additions in about a decade.

Marriott International Inc. last week said it expects to double its number of hotel rooms in Europe to 150,000 by 2020. Leading the spurt are new Marriott brands Moxy and AC Hotels, which started in Europe before the Bethesda, Md., company introduced them to the U.S.

All of the deals involving the U.S. companies are franchise and hotel-management agreements with hotel developers, which own or will build the properties.

During the recession, when travel slumped and independents everywhere struggled, many European hoteliers sought affiliations with big brands to tap their global distribution networks and marketing muscle. As travel came back, the trend toward established brands continued.

Hilton, for example, said it recently converted independent hotels in Venice and in Izmir, Turkey, into its midmarket Doubletree by Hilton brand. Blackstone Group LP also purchased the Concorde Opera hotel in Paris and converted the independent brand to a Hilton, which is owned by the investment firm.


Filed Under: Companies

About the Author:

RSSComments (0)

Trackback URL

Comments are closed.

Read previous post:
Robots, retina scans, and infrared sensors: Hotels go hi-tech

It is said that competition is the mother of innovation. And faced with competition not only from other hotels, but...