Hotel market breaks records, but caution advised

door: Sonny Duijn , Stef Driessen , Thom Neleman

The number of hotel guests in the Netherlands has risen this year to over 28 million: a new high. Consumers also appear to be willing to pay higher prices, and profitability is at its highest point since the year 2000. The volume of investment in hotel real estate is at record levels, prompting us to revise our forecast to a 7% increase in revenue for hotels in 2017. However, the planned increase in the number of hotel rooms poses a challenge to the sector.

In Amsterdam alone, there are plans to create some 7,900 additional hotel rooms by 2023, most of them in 2018 and 2019. Extra rooms are also being planned outside the capital. And if the growth in tourism stagnates, Airbnb will prove to be a more serious competitor to hotels in the leisure stay market. Hoteliers therefore need to take steps to maintain a distinctive profile and to keep a close eye on the market and respond swiftly to developments.


Sector-update-Hotel-market-1611-1.pdf (1 MB)

Increase in tourism

We estimate that this year, the number of hotel guests will rise to over 28 million: a new high. This is an increase of 10%, or an extra 2.6 million guests, compared with the year before, and represents an overall rise of 35% since 2012.

The anticipated growth of hotel tourism in the Netherlands is the result of developments that have occurred in 2017 to date. The additional visitor numbers come from several countries, including Germany. Hotel tourism from the UK has also risen sharply despite the uncertainties surrounding Brexit and the decline in confidence among British consumers. There has also been a strong increase in the volume of hotel guests from Asia and the US, by approximately 25% up to and including August.

Throughout 2017 as a whole, an estimated 500,000 extra hotel guests from Asia came to the Netherlands than in 2012.

More than half of all overnight stays in Dutch hotels take place in Noord-Holland and Zuid-Holland provinces. Other regions are also popular, as shown in table 2. Utrecht and Maastricht are examples of cities where the number of hotel guests and overnight stays has risen particularly strongly.

Price evolution

The cost of a hotel room has gone up, driven by the strong demand. 2016 saw the biggest price rise for Dutch hotels within a year in at least 20 years (by more than 8%), according to CBS. The cost of hotel stays also rose in 2017. During the first three quarters, prices rose by just over 5% year-on-year.

Consumers appear to be willing to pay higher prices for hotel rooms, a factor that is boosting the profitability of hotels, which last year reached its highest point since 2001 and will very probably rise still further in 2017 (Horwath HTL).

This year, prices rose in various cities. In Amsterdam they went up by 2.2% in the first five months. Price hikes for an average standard double room were higher still in Breda (+7%), Groningen (+6%), Haarlem (+4%), Rotterdam (+3%) and Delft (+3%) (Trivago, analysis performed by ABN AMRO).

Hotel prices in Amsterdam are the most expensive, followed by The Hague, Maastricht and Utrecht. Hotel prices in Amsterdam are now among the highest in Europe, according to an analysis of Europe’s 50 largest cities. In 2011, Amsterdam was still not in the top 10, but since then, prices there have risen by 29%.

The increase in the number of overnight stays in hotels, together with the rise in prices, contributed to a favourable investment climate for hotels, boosting occupancy levels and revenue per room.

Record investments

The increase in the number of overnight stays in hotels, together with the rise in prices, contributed to a favourable investment climate for hotels, boosting occupancy levels and revenue per room.

Investors from Germany, the Middle East and Asia were among those anxious to expand their hotel portfolios, initially primarily in Amsterdam, and additionally shifting their focus to some extent to the rest of the country, where tourism is also growing.

Investment in Dutch hotel real estate reached a record level in 2017, helped in part by low interest rates.  Two very large transactions also gave a significant boost to the volume of real estate investments in 2017. In 2017, the transaction value in hotels far exceeded the volumes of previous years.

For example, the Chinese conglomerate Anbang acquired the Amsterdam-based four-star hotel Double Tree from Hilton for 356 million euros, and the five-star W Hotel went to the German Deka Immobilien (Invast) group for 260 million euros.


In terms of the price paid per hotel room in euros, both transactions were well above average. However, we feel this statement requires some qualification. In both cases the food and beverage component was extremely high, which drives up the price. The property deals also covered other elements: spa and fitness facilities, corporate function rooms for letting out, and (in the case of W Hotel) retail outlets.

This multifunctional aspect is a major component of these hotels, and inflated the cost of the transactions, which is why we don’t feel that in this instance the average price paid per room is a good indicator.

Nevertheless, these are substantial transactions of a size reminiscent of the sale of the Amstel Hotel in 2014, which was at the time acquired by one Qatari investor from another for what amounted to 800,000 euros per room.

Major transactions are also taking place outside Amsterdam. The Chinese investor Holei, for example, marked its entry to the Dutch market this year with the acquisition of the Holiday Inn in Leiden.

The current strong investment climate makes another major transaction highly likely, not least because hotels are also trying to boost their profile as an ‘experience’ destination and are therefore adding more functions. In the current market conditions (i.e. a growing economy) this could drive up the price of hotel rooms.

How is the supply side evolving?

So far, we have looked mainly at developments on the demand side. However, in order to compile an accurate analysis we must also examine the supply side. The number of hotel rooms in the Netherlands has gone up by 11% since 2012, mainly in Amsterdam, where over 50% of the additional supply is located.

The capital will therefore be a key factor in any conclusion we draw about the supply of hotels/hotel rooms.

Due to the sharp increase in the supply of hotel rooms at the beginning of 2017, Amsterdam has been pursuing a restrictive policy in relation to hotels. As a result, the city council has not been granting any new licenses for hotels in popular parts of the city. And in specific areas surrounding these neighbourhoods, a ‘no-unless’ policy applies. Will this create a stagnation in supply?

No it will not, since many licenses have already been granted and plans submitted. This will result in the creation of 7,900 extra hotel rooms between now and 2023, according to an internal survey by ABN AMRO, bringing the total supply of hotel rooms in the capital to 40,000. Most of the additional supply will be in four-star hotels.

We can state with a high degree of certainty that most of the existing plans will be realised. In fact: 66% of the proposed extra rooms are already under construction. 31% are in the planning phase and only 2% are in the early conception phase, according to our internal survey. A large proportion of the rooms will therefore come to fruition, although their completion may be delayed.

Mainly in 2018

The lion’s share of the extra hotel rooms will be realised in 2018 and 2019. In 2018 alone no fewer than 3,980 extra hotel rooms will be created, representing an increase of more than 12% in the capital.

This will add an extra 3% to the supply of hotel rooms for the Netherlands as a whole, not counting new hotel rooms in other regions. Some 1,934 new rooms are planned for Amsterdam in 2019. In short, the volume of supply is rising sharply. The increase in hotel rooms in Amsterdam in 2018 and 2019 alone will thus be greater than the increase across the whole of the Netherlands from 2015 to 2017 inclusive. This strong growth is also relevant for hoteliers outside Amsterdam, who will also be competing with ‘new’ market entrants.

Temporary squeeze on revenue per room

It is therefore likely that hotels in and around Amsterdam will experience a temporary squeeze on Revenue per Available Room (RevPAR) due to a decline either in their levels of occupancy or the prices they can charge.

Provided the plans are realised in time, a 12% growth in the number of overnight stays in hotels in the capital would be needed (based on the same number of guests per room) to maintain current levels of occupancy. For hoteliers, it is therefore vital that tourism continues to grow.

After 2022 there would appear to come an end to the growth of supply. Existing hotels would only then be able to fully benefit from the restrictive hotel policy, provided the economic tide is in their favour. And assuming these hoteliers can also be distinctive enough to emerge from the preceding period unscathed.

If tourism continues to grow at the same high rate on average (and slightly tails off), hotels in Amsterdam will be full for large parts of the year by around 2024.

Property developers, investors and entrepreneurs have also identified opportunities elsewhere in the Netherlands, partly in response to the restrictive hotel policy in Amsterdam.

‘Wind wheel’ in Rotterdam

One of these locations is Rotterdam, where a particularly striking proposal includes a plan for a futuristic building in the shape of a ‘wind wheel’ containing a skybar, shops and overnight accommodation. This project again shows how hotels are broadening their function. The plan, which has been submitted by the Dutch Windwheel Corporation, is intended as a showcase for sustainability.

This is reflected in further information in the existing hotel construction plans. An old bakery in Leeuwarden, a former bank building in Cuijk, a redundant water tower in Dordrecht, a series of old churches, a redundant farm and part of the former royal palace of Soestdijk are all being redeveloped into hotels. In Maastricht, a hotel where guests can bring their own chef or cook to the restaurant will be opening in 2019.

A total of 89 (publicised) plans for new hotels have already been submitted in the Netherlands this year, to our knowledge. There are also 51 plans for hotel renovations and refurbishments. All the plans submitted up to September 2017 involve a total of more than 8,000 rooms.

What about Airbnb?

Hotels naturally also have to compete with other accommodation providers. The home holiday rental platform Airbnb is a much-discussed player in this sector, with people’s willingness to rent out their homes having grown in recent years.

The crucial question here is: does a player like Airbnb pose a genuine threat to hotels? We believe it does. Not so much for business overnight stays, but certainly for what the hotel industry refers to as ‘leisure’ stays: overnight stays by consumers in their free time. We expect competition from Airbnb to especially intensify in the event of a moderate economic slowdown, at a time when such competition would be least welcome for hoteliers.

Published figures on Airbnb are widely divergent, but clearly these providers are mainly present in large cities. How large is their market share? According to Colliers estate agents and the Hotelschool The Hague, Airbnb’s market share in Amsterdam last year was 10.7%. They scanned the number of overnight stays in Airbnbs and compared this with the total number of overnight stays in hotels and Airbnbs together. This showed that Airbnb’s market share in The Hague and Rotterdam was 7.3% and 6.5% respectively.

The increase in the price of hotel rooms is benefiting peer-to-peer platforms like Airbnb (and similar concepts). Amsterdam’s restrictive hotel policy also favours Airbnb and comparable platforms, and we expect them to benefit from it.

Distinctive capacity

Essentially, then, there is a lot happening on the supply side of the hotel market. When the economy slows down, competition will intensify sharply straightaway. Not just from other hotels but also from players like Airbnb.

So while the economic tide is strong, it is important that hotels work on their distinctive capacity. One way is to focus on offering luxury at an ‘affordable’ price, and/or by selling ‘experience’ (including through the addition of a range of other activities and a high-quality food & beverage department) and service. In all cases, good online exposure (boosted by attractive photos and an efficient and navigable booking system) is vital. Hotels that fail to offer a distinctive level of comfort or experience will find the increased competition a serious problem.