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TOURISM ECONOMICS - WTM WEBINAR

EUROPEAN TOURISM AND CORONAVIRUS: 2020 LOSSES AND POTENTIAL RECOVERY

David Goodger Managing Director, EMEA Tourism Economics [e-mail]

April 2020

Global lockdowns are having a very large impact on economy and travel

Global lockdowns

China

Italy

16%

Spain

France

Germany

Past

US (specific states)

UK

India

Australia

Japan

63%

Other

Present

0	20	40	60	80	100
Source : Oxford Economics/Haver Analytics		% of global GDP	Source: IATA Economics using FlightRadar24 data

Immediate economic impact will be greater than during GFC

World: GDP

% quarter		Non-China EM q/q contribution (RHS)	Forecast
4
			China q/q contribution (RHS)

Advanced economies q/q contribution (RHS)

2		Global % quarter (LHS)
0
-2
-4
-6
-8
2004	2006	2008	2010	2012	2014	2016	2018	2020

Source : Oxford Economics/Haver Analytics

Travel is falling more sharply than GDP

Europe GDP & Tourist Arrivals		GDP (real price)
Annual growth, %

40%				Prior upside
30%				Prior downside
20%				New baseline
10%
0%
-10%
-20%
-30%
-40%
-50%
2001	2004	2007	2010	2013	2016	2019	2022

Source: Tourism Economics

Travel restrictions are dominant effect in near-term

Coronavirusscenario assumptions: Europe

Total expected impact duration	#monthsincluding:	Total 2020
		%2020	Current	Reduced	travel fall*
	# months	affected	restrictions restrictions	%year
Feb-Jul	6	60%	3	3	-28%

Feb-Jan	12	95%	6	6	-61%
Feb-Jul 21	18	95%	10	1	-76%

* impact on arrivals relative to counterfactual

• Assumed 8-month restriction period will reduce European travel by ~37% on top of other economic effects (eg reduced incomes)
• 6-monthduration would bring smaller annual impact.
• Longer duration of any restrictions will have larger impacts on travel

Policy stimulus is providing vital support for economic (& travel) recovery

Global: Fiscal impulse
Ppts of potential GDP
2.5	Advanced Economies	Emerging Markets	World
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0			Forecast
-1.5
-2.0
2000	2005	2010	2015	2020

Source : Oxford Economics/Haver Analytics

Expected growth in recovery but impacts will be felt into the medium term

Global GDP Outlook

Annual growth, %			Global		US		Eurozone			China
10%
8%
6%
4%												2022 GDP relative to
2%												pre-recession trend
0%
-2%
-4%
-6%
2019	2020	2021		2022

Source: Oxford Economics

No immediate return to prior levels of demand

Europe Tourist Annual growth, %

40% 30% 20% 10% 0% -10%-20%-30%-40%

-50% Western

Arrivalsby Destination Region	2021	2022	2023
2020

Europe	Northern Europe	Southern Europe	Central/Eastern
			Europe

Europe tourist arrivalsby destination region, relative to 2019
% difference from 2019 levels		2020 2021	2022 2023
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%		Western Europe	Northern Europe	Southern Europe	Central/Eastern
					Europe

Source: Tourism Economics

Source: Tourism Economics

Questions: Use the Q&A box - please remain on mute

Long-haul travel is more volatile, but short-haul is important

Europe inbound arrivals growth 2020 by region

Europe inbound arrivals growth 2020 by region

% growth

0%
-10%
-20%
-30%		-32%	-35%
-40%
		-39%	-40%	-40%	-41%
-50%							-45%	-50%
-60%		Rest of	C&E	World S. Europe N. Europe W. Europe United	China
		World	Europe				States

millions 0

-10-20-30-40-50-60-70-80-90

-100

-8

-19-23

-34

-47-50

		-93
MEA Asia-Pacific Americas S. Europe N. Europe	C&E	W. Europe
	Europe

Source: Oxford Economics

Source: Oxford Economics

Short-haul recovery will be essential in early phases

Top 15 country destinations, split by distance, 2020
Millions
France		79%													21%
Spain		89%									11%
Turkey		76%							24%
Italy		74%							26%
Germany		80%					20%
UK		70%			30%
Russia		85%			15%
Greece		92%			8%
Austria		89%			11%
Poland		84%	16%
Netherlands		80%	20%									Short- & Medium-haul
Croatia		88%	12%
									Long-haul
Hungary		93%	7%
Portugal		75%	25%
Czech Republic		79%	21%
	0	10	20	30	40	50	60

Source: Tourism Economics

Long-haul is more important for major city destinations

Top 15 city destinations, split by distance, 2020

(mn)	Paris		54%							46%
	London		63%							37%
	Rome		57%							43%
	Barcelona		60%					40%
	Istanbul		54%					46%
	Amsterdam		70%					30%
	Prague		72%			28%
	Lisbon		56%			44%
	Dublin		71%			29%
	Madrid		60%			40%
	Berlin		79%			21%
	Vienna		75%			25%					Short- & Medium-haul
	Warsaw		84%			16%						Long-haul
	Cracow		89%			11%
	Budapest		84%			16%
		0	2	4	6	8	10

Source: Tourism Economics

Domestic travel remains very important for many markets

Domestic & international tourism spend for largest European destinations

US$bn, 2019, domestic % share as labels

Belgium		52%
Norway		69%
Portugal		30%							Inbound
Greece		32%
Sweden		55%							Domest ic
Netherlands		48%
Switzerland		56%
Austria		50%
Russia		71%
Turkey		36%
Spain				44%
France				66%
UK				82%
Italy				76%
Germany										86%
0	100	200	300	400

Source: Tourism Economics

Domestic travel recovery expected ahead of international

Destination performance will rely on source market mix

European city reliance on domestic and long-haul arrivals, 2019

Domestic % share of total arrivals

100%		Less volatile
				Sheffield
				Leipzig
80%		Hamburg	Bremen
			Gothenburg
			Essen
		Stockholm	Oslo
60%				Berlin
	Düsseldorf	Birmingham
				Bergen
				Liverpool
40%				Antwerp
			Belfast	Copenhagen
20%
				Brussels
0%

	Cardiff
		Glasgow
	Edinburgh
Leicester
Manchester		Frankfurt
Munich
Helsinki		More
Madrid	Rome
Milan	Paris	Sevilla
	London
		Istanbul
Amsterdam	Geneva	Florence
Vienna	Barcelona
Dublin
		Reykjavik
	Dubrovnik

volatile

Zurich

Venice

0%

20%

40%

60%

Source: Tourism Economics	Long-haul % share of foreign arrivals

Global headquarters	Offices in	Offices in	Offices
Oxford Economics Ltd	Europe, Middle East	Americas	Asia Pacific
Abbey House	and Africa
121 St Aldates		New York	Singapore
Oxford, OX1 1HB	Oxford	Philadelphia	Sydney
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Tel: [phone]	Belfast	Boston	Tokyo
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London	Paris	Los Angeles
Broadwall House	Milan	Toronto
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London, SE1 9PL	Dubai	Houston
UK
Tel: [phone]
New York
5 Hanover Square, 8th Floor
New York, NY 10004
USA
Tel: [phone]
Singapore
6 Battery Road			Email:
#38-05
		[e-mail]
Singapore 049909
Tel: [phone]			Website:
			www.oxfordeconomics.com

Impact of COVID-19 on Global Hotel Industry

Robin Rossmann - Managing Director International

Source: 2020 STR, LLC / STR Global, Ltd. trading as "STR". © CoStar Realty Information, Inc. Any reprint, use or republication of all or a part of this presentation without the prior written approval of STR is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This presentation is based on data collected by STR. The information in the presentation should not be construed as investment, tax, accounting or legal advice.

Agenda

1. Global impact of COVID-19 & China green shoots
2. Focus on Europe
3. Previous recovery cycles

Source: STR. 2020 © CoStar Realty Information, Inc.

1. Global impact of COVID-19

and

China green

shoots

Source: STR. 2020 © CoStar Realty Information, Inc.

Rest of the world is about 2 months behind China

Absolute Weekly Occupancy, Select Countries, Aligned by level of OCC

	China	US	Europe
70%			Week End:
			US 3/7
60%			China: 1/18
50%	Week end:
	Europe 2/29
40%
30%			Week end:	Week End:
			US 4/18	China: 4/18
20%
10%

Week End:

		Week End: China 2/29
0%	Week End:	Europe 4/18

China 2/8

Source: STR. 2020 © CoStar Realty Information, Inc.

4

China recovers as US & Europe level-out at the bottom

Absolute R7 occupancy by day

China		United States		Europe

70%

60%

50%

40%

35,2%

30%

23,7%

20%

10%											8,5%
0%
01-feb	08-feb	15-feb	22-feb	29-feb	07-mar	14-mar	21-mar	28-mar	04-apr	11-apr	18-apr

Source: STR. 2020 © CoStar Realty Information, Inc.

5

Over 90% of hotels in China are open

More than half were closed in February

100%

99,2%	97,2%	92,6%	95,7%	93,4%

84,5%

Luxury

Upper Upscale

Upscale

Upper Midscale

Midscale

Economy

Percentage of hotels participating with STR open at end of March vs. January 2020

Source: STR. 2020 © CoStar Realty Information, Inc.

Variations in recovery speed - Hangzhou leading the way to 50%

Mar 1st - Apr 11th 2020 Absolute Occupancy

50%

2020 Beijing

2020 Shanghai

2020 Hangzhou

0%

Mar

Apr

Source: STR. 2020 © CoStar Realty Information, Inc.

Still some way to go compared to 2019

Mainland China, Mar 1st - Apr 11th 2020 vs 2019 Absolute Occupancy

2019 Beijing		2019 Shanghai		2019 Hangzhou

100%

2019

50%

2020

0%

Mar

Apr

Source: STR. 2020 © CoStar Realty Information, Inc.

Midscale and Economy have regained half the Occupancy from last year

No weekday changes in 2020

2020 中档和经济型 Midscale & Economy		2019 中档和经济型 Midscale & Economy

100%

75%	~75%

50%

50%

25%	25%

0%

Mar

Apr

2019

现在

Now

45天前 45days ago

Mainland China, Mar1st - April 11th 2020 vs 2019 Absolute Occupancy

Source: STR. 2020 © CoStar Realty Information, Inc.

Luxury will take longer to reach similar levels

2020 奢华 Luxury		2019 奢华 Luxury

100%

75%

50%

25%

0%

Mar

Apr

~65%

~25%

~5%

2019

现在

Now

45天前 45days ago

Mainland China, Mar1st - April 11th 2020 vs 2019 Absolute Occupancy

Source: STR. 2020 © CoStar Realty Information, Inc.

China recovery lessons

Might be applicable as we look forward to recovery across the rest of the world

• Most closed hotels re-opened in 2 months - but some still closed
• First phase demand drivers have been
• • domestic leisure
  • corporate business at industrial park area
  • quarantined guests stay at hotels close to airport
• Lower scale hotels gained higher occupancy first
• Tangible factors/indicators of hygiene will matter
• Will recovery continue or will it flatten?

Source: STR. 2020 © CoStar Realty Information, Inc. 11

Europe

Photo byAnastasia DulgieronUnsplash

12

January - Positive start to the year in Europe

Europe - RevPAR % Change, Local Currency, January 2020

<0

0-3

4-6

>6

															Stockholm																								Helsinki
														Oslo							-2	-1						6
																																					St. Petersburg
																																17
Edinburgh								-1									-9							Copenhagen	12			Moscow
Amsterdam												-1				0										Berlin
	-4																		Warsaw
Dublin																	3
1												1
London																																	Kiev			Nursultan			31
																	4					-2									Prague
		Brussels
											28													Budapest
							Zurich							0
											14										Vienna
															15
				Paris							12				-7							Bucharest
									6																								Belgrade	-12		Tbilisi
Madrid													Rome		7										29						Istanbul					-2
								0																				Tel Aviv
Barcelona	0
Lisbon																								8							Athens

© 2020 STR. All Rights Reserved.

February - COVID-19 impact can start to be felt across Europe

Europe - RevPAR % Change, Local Currency, February 2020

<0

0-3

4-6

>6

															Stockholm																									Helsinki
														Oslo							-2	-1					-3
																																					St. Petersburg
																															6
Edinburgh								-4									-8							Copenhagen					3			Moscow
Amsterdam												-6				-3										Berlin
	-3																				Warsaw
Dublin																	-5
-2																		-4
London										-6					-14									Prague						Kiev			Nursultan			13
		Brussels
							Zurich							-1		23															Budapest
											0											Vienna
															8
				Paris							4			-9								Bucharest
									5																										Belgrade	-22		Tbilisi
Madrid													Rome		-11							12							Istanbul
								-27																Tel Aviv				-7
Barcelona	6
Lisbon																	-12								Athens

© 2020 STR. All Rights Reserved.

March - strong RevPAR declines due to the spread of COVID-19

Europe - RevPAR % Change, Local Currency, March 2020

																Stockholm																						Helsinki
															Oslo						-57	-64	-55
																															St. Petersburg
																															-44
Edinburgh									-56									-72						Copenhagen			-46			Moscow
Amsterdam														-72				-67								Berlin
			-64									-69									Warsaw
Dublin
-60														-68
London																											Kiev			Nursultan			-56
		Brussels								-70				-78								Prague
														-53				Budapest
								Zurich							-72		-69
																				Vienna
																-69
				Paris									-65			-77					Bucharest
										-76																									Belgrade	-68		Tbilisi
Madrid												Rome			-86							-55					Istanbul					-75
						-77															Tel Aviv
Barcelona	-71
Lisbon																						-83							Athens

© 2020 STR. All Rights Reserved.

Europe RevPAR decline is now significantly worse than 2008/9

Mainland China & Europe, RevPAR % change over prior year, Rolling 28 days

100%

80%

60%

40%

20%

0% -20%

-40%-60%

Mainland China		Europe

April 2009: -28.0%

August 2009: -59.1%

March 1 2020: -85.3%

-80%

April 12 2020: -89.4%

-100%

jan-07

jan-08

jan-09

jan-10

jan-11

jan-12

jan-13

jan-14

jan-15

jan-16

jan-17

jan-18

jan-19

jan-20

Source: STR. 2020 © CoStar Realty Information, Inc.

Anticipated easing of social distancing is likely to be gradual

… and there is still a lot of uncertainty and lack of clarity about how it will be phased

Country		Minimum dates that restrictions will remain in place
	Easing of lock-	Schools	Construction,	Retail	Restaurants	Gatherings >	Borders
	down starts		Manufacturing		/hotels	100 people
Denmark	13 April	15 April	?	10 May	?	August	10 May
Italy	4 May	3 May	?	13 April	?	?	?
Spain	9 May	20 April	13 April	26 April	?	?	?
Portugal	1 May	September	?	?	?	?	15 April
France	11 May	11 May	Never fully shut	TBC	June	?	?
UK	7 May	?	Never fully shut	?	?	?	Never closed
Germany	3 May	4 May	Never fully shut	20 April	Soon?	31 August	?
Switzerland	April 27	11 May	?	27 April	?	?	?

Source: STR. 2020 © CoStar Realty Information, Inc. 17

What are the factors that can impact the forecast

Let's consider the three demand types of Leisure, Corporate Transient, and Corporate Group

Faster	Demand type		Quicker recovery scenarios		Slower recovery scenarios
	• Pent-up demand drives summer rebound	• Virus persists/resurfaces in Autumn/2021
	Leisure	•	Domestic-led	•	Boarders remain closed/restricted
		• Travellers who are immune	• Recovery dependant on vaccine available
speed
Corporate	•	Sharp economic rebound	•	Prolonged recession
Recovery
transient	• In-person contact always important	• Move to digital changes travel behaviour
Slower	Corporate	• Postponed events happen in Q3/Q4	• Only after vaccine implementation
group	• 2021 is a year of catch-up	• Cost control supresses recovery

Source: STR. 2020 © CoStar Realty Information, Inc.

V

U

W

Travel has proved its resilience to demand shocks before

UNWTO statistics on international travel numbers

Information, Inc.

V… A SARS like 'short-term' decline and bounce-back seems unlikely

China Hotel Occupancy March-November 2003

100%

80%

60%

40%

20%

0%

Beijing Hong Kong SAR Shanghai Guangdong Chengdu & Chongqing

12 March 2003	6 months
World Health Organisation	5 July 2003
issues a global alert on SARS	World Health Organisation
	announced SARS contained

13 June 2003

Travel restrictions start

easing across APAC

3 months

Mar-03

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Source: STR / 2020 © CoStar Realty Information, Inc..

U… but will it be as/more severe than the Global Financial Crisis?

Europe, Consistent Sample, RevPAR and GOPPAR Indexed to 2007, EUR, Constant Currency

GOPPAR Index		RevPAR Index

120

110

7 years

2 years

100

90

80

70
2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018

Source: STR. 2020 © CoStar Realty Information, Inc.

So what's a W shaped recovery

An initial recovery, followed by stagnation/decline until virus cured/controlled then recovery

Source: STR. 2020 © CoStar Realty Information, Inc.

Conclusions

1. China seems to be at the end of the beginning of its recovery
2. • Occupancies near/heading towards half of what they would usually be
   • Driven by domestic demand of both leisure (first) then business
   • Time will tell if the recovery continues or flattens out

2. Europe's recovery has not yet begun

1. • Occupancies have bottomed out but hotels still closing
   • Some planning of easing lock-downs but still seems some way off for hotels
   • Restrictions on travel and hotels likely to remain in place longer… and borders even longer
2. Everything will be OK in the end… it's not OK yet… so it's not the end
3. • Most forecasts are still for a bounce-back… even if there is a drag
   • It matters more now than ever to have good hotels with strong brands and management teams

Source: STR. 2020 © CoStar Realty Information, Inc.

Questions

Source: 2020 STR, LLC / STR Global, Ltd. trading as "STR". © CoStar Realty Information, Inc.

Any reprint, use or republication of all or a part of this presentation without the prior written approval of STR is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This presentation is based on data collected by STR.

The information in the presentation should not be construed as investment, tax, accounting or legal advice.

Current State of the Nordic Hotel Industry

Webinar 2020-04-29

Broad decline with slight differences between markets

Occupancy and ADR YoY 1 Mar-26 Apr 2020 (local currencies)

Sudden and massive decline in demand

Occupancy, sold rooms, room revenue and closed rooms rolling 12 months indexed 2015-2020YTD (local currencies)

Occupancy

Sold Rooms

Room Revenue		Closed Rooms

• 9-12%decline in all Nordic capitals on a rolling 12 months basis year on year since 1 March 2020

Temporary closings benefit those staying open

Occupancy with fixed availability and occupancy with adjusted availability 7 days rolling YoY [Oslo]

• Significant positive effect for hotels staying open from other hotels closing

Increased domestic travel may make up for lost export

Foreign vs domestic spending on travel [Sweden]

Swedish tourist

spending

Swedish tourists' spending abroad

Swedish tourists' domestic spending

			Tourist spending
				in Sweden
	Decreased spending
	due to recession
Spending still
made abroad		Foreign		Lost international
				tourists'
Can Nordic tourist spending usally		spending		tourist spending
made abroad be transferred to the		in Sweden
Nordic countries to make up for
lost foreign tourist spending?
						Decreased spending
						due to recession
				Swedish
				tourists'
				domestic		Recovery post-
				spending		Corona

Source: Statistics Sweden / The Swedish Agency for Economic and Regional Growth NB! Schematic illustration

• Significant potential in increased domestic travel spending short-term in the Nordics

Occupancy On the Books indicate short-term effect so far

Occ On the Books per month as of 1 Apr 2020, 1 Mar 2020, 1 Apr 2019 and actual occupancy last year

Stockholm

Copenhagen

Compared to Apr LY

Negative Pickup Mar

Oslo

Note: Helsinki market not covered with On the Books

• Negative pickup short-term, passive medium-term

Current State of the Nordic Hotel Industry

Summary

• So far - a severe demand problem
• • Ability and willingness to spend may yet be upheld
  • Cancellation patterns indicated by OTB data shows negative expectations only short-term so far, passive attitude medium-term
• The million-dollar question: How long will this last?
• • When does a short-term shock turn into a long-term recession?
  • So far, very few bankruptcies in the hotel sector in Sweden
  • The fiscal measures of unprecedented dimensions may be added to even more
  • Will the aftermath of the crisis have a long-term effect on international travel?
• For the medium to long term we may still see a positive development
• • Hotels still open may get much welcomed boost from other hotels closing down
  • Exchange rate effects may prove positive to Sweden, Norway and Iceland if international travel resumes
  • Broad spread of staycation concept may be the single most important factor to hope for in most Nordic countries