Report Overview

This report, a market size of the European Union accommodation sector, continues Skift Research’s effort to size the global travel industry. It builds upon our earlier U.S. accommodation sector market estimates by crossing the pond to Europe for the first time in this research series. This report covers all 28 member states of the European Union including, for the time being, the United Kingdom.

Skift Research estimates that the accommodation sector in the European Union generated revenues of €200 billion in sales in 2018. Further, we forecast revenues in the accommodation sector to grow 3.1% this year to €206 billion in 2019 sales and see revenue approaching €213 billion by 2020.

The fastest growing segment within that market has been, and will continue to be, alternative accommodations. We estimate that this subsector held a 13% share of the overall European accommodations market in 2018 and foresee that figure to rise.
This report includes an analysis of, and estimates for, key hospitality performance indicators such as revenue per available room, average daily rate, and occupancy rate for the entire market, subsectors, and individual countries.

This sector research also provides hotel market share estimates for individual European Union member states and for 14 large, publicly traded hotel companies (Accor, Best Western International, Hilton Worldwide, Hyatt Hotels Corp, InterContinental Hotels Group, Marriott International, Meliá Hotels International, Millennium & Copthorne Hotels, NH Hotel Group, PPHE Hotel Group, Radisson Hotel Group, Scandic Hotels Group, Whitbread [d/b/a: Premier Inn], Wyndham Hotels & Resorts).

What You'll Learn From This Report

  • EU accommodation sector market size estimates, 2008–2020E
  • EU traditional accommodation key performance indicators, 2008–2018E
  • EU alternative accommodation key performance indicators, 2008–2018E
  • EU traditional accommodation market shares of 28 member countries, 2008-2020E
  • Top 14 largest public hotel companies market shares, 2018E
  • Breakdown of EU total accommodation by business size, including number of companies, properties, rooms, employees, and revenue

Executive Summary

Europe is the largest tourist destination in the world, fueled by both leisure travel and business travel. Skift Research estimates that the accommodation sector in the European Union generated revenues of €200 billion in sales in 2018. Further, we forecast revenues in the accommodation sector to grow 3.1% this year to €206 billion in 2019 sales and see revenue approaching €213 billion by 2020.

The fastest growing segment of accommodations in the European Union has been, and will continue to be, alternative accommodations, commonly referred to as short-term rentals (see The Short-Term Rental Ecosystem and Vendor Deep-Dive 2019 for more details on the evolution of this sector). This sector represented 10% of the overall accommodation industry in 2014, rising to 12% in 2017. Due to its above-market growth rate, we estimate it crossed 13% share in 2018 and foresee that alternative accommodations will continue to steadily gain share in Europe.

Alternative accommodations today are more prominent in Europe compared to the U.S. where the subsector had a 7% market share in 2017 and we forecast it to have an 11% share by 2019. Also worth noting is camping grounds, recreation vehicle parks, and trailer parks which control a small, but meaningful, niche in the market of a 5–6% share.

Since 2008 and the Great Recession, revenue per available room (RevPAR) for European Union traditional accommodations has grown at a respectable 2.2% annualized rate. The strongest growth has come over the last five years, as Europe exited the sovereign debt crisis.

Alternative accommodations grew even faster, increasing revenue per available bed (RevPAB) at a 2.5% 10-year annualized rate. Faster still, is campgrounds which posted a 3.8% 10-year compound annual growth rate (CAGR).

The five largest geographical markets for hotels (traditional accommodations) in the European Union are, in order: Germany, Spain, the United Kingdom, Italy, and France. Collectively these five nations represented €108 billion in sales, 69% of the EU market in 2017, and we estimate them to grow to €119 billion of revenue by 2020. That is up from €82 billion in 2008.

Lastly, Skift Research analyzed the public filings of 14 major publicly traded hospitality companies and has developed 2018 market share estimates for each company within the hotel and similar accommodations category (traditional). We believe that these chains represent a collective €30 billion of room revenue, or just over 18% of EU hotel market share.

European Union Accommodation Market Size

Europe is the largest tourist destination in the world, receiving 667 million visits in 2019, of which, the European Union received 523 million. This massive tourism industry is fueled by both leisure travel — Europe is home to 455 UNESCO world heritage sites, 45% of the global total — and business travel — the European Union is the second largest economic bloc in the world.

Unsurprisingly, Europe has one of the largest and most developed accommodation industries in the world, both in terms of the number of accommodations available and the sales they generate.

Revenue and Forecasts

Skift Research estimates that the accommodation sector in the European Union generated revenues of €200 billion in 2018, a 3.8% compound annual growth rate (CAGR) since 2008, the earliest year in our analysis.

Further, we forecast revenues in the accommodation sector to grow 3.1% this year to €206 billion in sales; we see sales approaching €213 billion by 2020, a 3.4% growth rate.

 

Exhibit 1: EU accommodation sector market size estimates, 2008–2020E

 

The accommodation industry shrunk significantly in 2009 during the global financial crisis and struggled once more in 2013 due to the European-specific recession caused by the sovereign debt crisis. The sector bounced back in 2014 and 2015 (8.3% and 8.1% growth rates, respectively) and has been growing nicely over the past few years.

We forecast that revenue will continue to increase in the coming years, but for growth to decelerate below the longer-term trend. For example, at the end of our 2020 forecast period, we expect for accommodation revenue to have grown at a 4.6% 10-year CAGR. However, we see the individual year growth rates for 2019 and 2020 coming in below that trend at 3.1% and 3.4%, respectively.

The fastest growing segment of accommodations in the European Union has been, and will continue to be, alternative accommodations. We see the subsector growing more than 1.7 times as fast as hotels, putting up a 7.4% CAGR from 2010–2020E compared to 4.3% annualized growth in the traditional accommodation sector.

 

Exhibit 2: EU accommodation sector market growth rates, 2009–2020E

 

Alternative accommodations represented 10% of the overall industry in 2014, 12% in 2017, and, due to its above-market growth rate, we expect it crossed 13% share in 2018. We forecast alternative accommodations to continue to steadily gain share in Europe.

Most alternative accommodations in Europe are incorporated businesses that operate apartments, bungalows, chalets, cottages, cabins, and youth hostels. Also included in our market estimate is the sharing economy — rooms or apartments let out by individuals who oftentimes share the space with their guests. Because these are not formally registered enterprises, they are often overlooked by government business statistics. We estimate that the sharing economy in accommodations grossed €2.3 billion in Europe in 2018. That means it made up 9% of the market for alternative accommodations and 1% of the overall accommodation market in the EU. (See our methodological footnotes at the end of this report for more details.)

Alternative accommodations today are more prominent in Europe compared to the U.S., where the subsector had a 7% market share in 2017 and we forecast it to have an 11% share by 2019.

Also worth noting is camping grounds, recreational vehicle parks, and trailer parks which control a small, but meaningful, niche in the market. These accommodation options are typically between 5 and 6% of the overall market and we do not foresee that changing meaningfully through 2020 for the EU. That said, some smaller countries with less developed lodging infrastructure rely on campgrounds as a much larger part of their accommodation sector.

 

Exhibit 3: EU accommodation subsector market share, 2008–2020E

 

Size and Scale of Enterprises

In 2016, the last year for which Eurostat data was available, there were just over 323 thousand businesses offering accommodation to travelers in the European Union. 155 thousand of them were hotels or other similar forms of traditional accommodations.

Just about the same amount of businesses (152 thousand) operated holiday and other short-stay alternative accommodations as did traditional accommodations. This excludes the informal businesses that make up the sharing economy. Even so, it reflects an astonishing rate of new business formation in the alternative accommodations subsector. Under 10 years ago there were only 82 thousand businesses operating short-term rentals, just about half as many enterprises as existed in the hotel space at the same time. Let’s restate that as annualized growth rates — net new alternative accommodation businesses have been added at a rate of 8% per year since 2008; for hotels that figure is 0.2%.

A minority of businesses run campgrounds or RV/trailer parks, and their net business formation rate has been about the same as for hotels.

 

Exhibit 4: EU accommodation entreprise count, 2008–2016

 

 

Exhibit 5: EU accommodation net enterprise growth rates, 2008–2016

 

In 2016, the last year for which we have historical data, there were 202 thousand traditional accommodation establishments in the European Union. This works out to 1.3 properties per operator, on average. This must naturally reflect a large share of independent owner-operators with one property to their name, partially offset by large chain operators.

The average enterprise operating within the formal alternative accommodations sector had 2.5 properties in 2016. This is because the required upfront capital investment required to buy a short-term rental is significantly lower than to develop a multi-unit hotel or resort. Reflecting this difference in the physical establishment size, the average hotel in Europe sleeps 68 to the average short-term rental’s 20.

 

Exhibit 6: EU accommodation establishments per enterprise, 2008–2016

 

 

Exhibit 7: EU accommodation establishment count, 2008–2017

 

Key Performance Indicators

Hotel Revenue Per Available Room

Revenue per available room (RevPAR) is one of the most important performance metrics for any hotel. It is a form of unit revenue and represents the amount of sales generated by a property or brand adjusted for the total number of rooms that have been built and are available to customers. It can also be expressed as the average daily rate (ADR) charged for booked rooms multiplied by the occupancy rate of the hotel (to account for the €0 ADR on unoccupied rooms).

RevPAR allows us to compare hospitality organizations across scale ranges; by factoring in the total available rooms, we can compare the performance of a global hotel brand to a small independent boutique on an apples-to-apples basis.

It also lets us compare the success of different operating strategies. For instance, in a weak market, one general manager may want to keep her property priced at a premium daily rate, even if it comes at the cost of fewer bookings, while another manager may cut prices to stimulate demand. Because RevPAR takes into account both pricing (ADR) and occupancy, we can still make a fair comparison of the two properties despite their different tactics.

Since 2008 and the great recession, RevPAR for European Union traditional accommodations has grown at a respective 2.2% annualized rate. The strongest growth has come over the last five years, as Europe exited the sovereign debt crisis, with RevPAR posting an impressive 5% annualized growth rate in 2017. We believe RevPAR decelerated somewhat and returned to a more normalized 2.4% growth rate for 2018.

 

Exhibit 8: EU traditional accommodation revenue per available room and % change, 2008–2018E

 

We can examine what is driving RevPAR growth (or decline) by decomposing the metric into its two component parts: average daily rate (ADR) and occupancy. Over the past five years, in aggregate, RevPAR growth has been split evenly between ADR and occupancy.

 

Exhibit 9: EU Hotel RevPAR growth decomposed into its key drivers, 2009-2018E

 

But that hides some inter-year differences. We estimate that this past year, 2018, pricing power was the biggest driver of RevPAR gains, as was the case in 2014 and 2015. This contrasts with 2016 and 2017 when increases in occupancy drove the majority of hotel performance improvements.

Hotel Occupancy and Pricing

Occupancy and average daily rate are also each important measures of hotel industry performance in their own right.

Examining the European Union hotel occupancy rate over the past decade, we see that the largest increases in occupancy have come over the most recent few years. Occupancy was previously trending in the low 70% range, with a notable recessionary decline in 2009. Starting in 2015 and continuing through 2017, hotel occupancy began to climb, settling in at an 80% rate, where we believe it still stands today.

 

Exhibit 10: EU traditional accommodation occupancy rate and percentage point change, 2008–2018E

 

Over the last decade, ADR changes have been more volatile with declines in both 2011 and 2016, which were years with positive RevPAR growth driven by occupancy growth. Room rates are often on the front line when it comes to responding to demand changes. The occupancy rate of an overall market (aggregate demand for the destination, not occupancy between individual properties within the destination) is partly a function of available building capacity and it can take years for new supply to come online. Room pricing, however, can be adjusted rapidly to respond to shifts in demand. Room rates are often updated daily, and sometimes even more frequently than that. We expect that, as the hotel revenue management landscape becomes ever more sophisticated, ADR will become even more sensitive to fluctuations in demand.

In 2018, we believe that hotels continued to take price increases, helping to boost RevPAR as occupancy rates were effectively unchanged. In fact, 2018 saw the strongest ADR environment since 2015, according to our analysis.

 

Exhibit 11: EU traditional accommodation average daily rate and % change, 2008–2018E

 

Revenue per Available Bed

The standard hotel room in Europe, and across the world, sleeps two (double bed or queen bed). But this is not the case for alternative types of accommodations. Hostels, with their shared bunks, can sleep 4–8 or more in a single room and a chalet vacation rental fits a full family or two. To adjust for these disparities, across and within accommodation subsectors, we can measure revenue per available bed (RevPAB).

Below, we present revenue per available bed for the entire EU accommodation sector and for its three main subsectors. We have restated the hotels data on this per-bed basis rather than on a per-room basis to allow for comparability (the average EU hotel has 2.08 beds per bedrooms). We have also excluded shared rooms from within the alternative accommodations subsector.

Looking across sectors, we quickly see the scale advantage that hotels have over alternative accommodations on a unit revenue basis. Hotels and other forms of traditional accommodations earn more than four times as much per bed as does an alternative accommodation. This is both a function of hotels being able to charge higher rates and driving higher year-round occupancy rates. The spread is (unsurprisingly) even wider compared to campgrounds and RV/trailer parks.

 

Exhibit 12: EU accommodation sector revenue per available bed, 2008–2018E

 

However, examining growth in revenue per available bed, shows a reversal in relative strengths. Traditional accommodations are seeing the slowest growth rates, 1.9% annualized over the last 10 years. Alternative accommodations grew notably faster, with its RevPAB increasing at a 2.5% 10-year annualized rate. Fastest still, is campgrounds which posted a 3.8% 10-year CAGR.

 

Exhibit 13: EU accommodation sector revenue per available bed growth rates, 2009–2018E

 

Alternative Accommodation Occupancy and Pricing

Again, we can split alternative accommodation RevPAB into its component parts. This reveals that essentially all of the subsector’s RevPAB growth has come from increased occupancy rates. This is indicative of the secular shift in demand towards alternative accommodations. This has been in part spurred on by Airbnb and its peers. The explosive jump in occupancy from 2015 continuing on through today is, to us, indicative of Airbnb hitting mainstream consciousness in the minds of the traveling public.

 

Exhibit 14: EU alternative accommodation occupancy rate and percentage point change, 2008–2018E

 

Room rates, on the other hand, are about the same today for alternative accommodations as they were a decade ago. Recall that in contrast, hotel RevPAR was driven about equally by ADR and occupancy over the last decade. We suspect the issue is likely rooted in consumer perception of the alternative accommodation product. For now, this has been no impediment to the sector’s growth. But long term, as the sector matures, it will have to grapple with this seeming inability to take pricing power. The next generation of vacation rental property managers are trying to build alternative brands which can shake this view.

 

Exhibit 15: EU alternative accommodation average daily rate and % change, 2008–2018E

 

Operating Margins

Top-line metrics are critical to understanding the business dynamics of any industry, yet are still an incomplete picture. Revenue speaks well to the demand environment but tells little of the costs associated with running a business in the accommodation industry. Operating income helps us understand this dynamic. It measures profit after personnel costs and other operating business expenses but excludes costs of financing or capital investment.

As of 2016 (unfortunately, operating income is reported out with a significant lag), the accommodations sector in the EU generated €36 billion of operating income, the vast majority of which (82%) came from traditional accommodations.

 

Exhibit 16: EU accommodation sector operating income, 2008–2016

 

However, when we shift to look at operating margins, traditional hospitality providers lag. This makes sense as the low-service business model of alternative accommodations reduces overhead expense, and for campgrounds, even more so.

 

Exhibit 17: EU accommodation sector operating margin, 2008–2016

 

Notable is the time series trend which shows the entire accommodations industry in the EU recording its highest margins since the global financial crisis. This speaks to the strong competitive position of the travel industry in this current economic cycle.

Accommodation Market Share by Enterprise Size

We used European governmental data to break down the accommodation sector based on the different sizes of enterprises. The primary determinant of enterprise scale in the EU is the number of employees. Large businesses operate with 250 employees or more. Medium businesses run with 50–249 employees, small ones with 10–49 staff, and micro-enterprises with less than that. These three categories often get aggregated into the group “small and medium enterprises” (SMEs).

It should be noted that due to a lack of data, this is the one section of the report where the market will revert from the EU-28 to the EU-27 for the years 2008–2010 (i.e., Croatia is not included in those years).

Traditional Accommodations: Hotels and Similar Lodging

The vast majority of hotel owners in the European Union are SMEs. The data for 2016 (the latest available year) shows this is truly no exaggeration; just 681 hotel enterprises employed more than 250 staff that year, 0.4% of all businesses. Yet, these large businesses employed 632 staff on average, while SMEs typically employ 11. That means that in aggregate, these large businesses accounted for 20% of all sector employment, 431 thousand jobs in total.

 

Exhibit 18: EU traditional accommodation operations breakdown by enterprise size, 2016

 

The scale advantage of large hotel enterprises is even more notable when examining revenue contribution. Those 681 businesses generate 24% of all traditional accommodation revenue in the European Union. These chain operations generate €52 million a piece, on average, compared to €748 thousand for SMEs combined.

Economies of scale also become clear looking at these figures. Large hotels can generate ~€83 thousand in sales per employee, a 27% efficiency over SMEs which earn ~€65 thousand per employee.

 

Exhibit 19: EU traditional accommodation revenue breakdown by enterprise size, 2016

 

Alternative Accommodations: Holiday and Other Short-Stay Lodging

Size disparities are even more pronounced in the world of alternative accommodations. Here the divide is not between large businesses and SMEs, or even medium and small businesses. 97% of all businesses in this sector are micro-enterprises, employing fewer than 10 individuals. With an average employee count of 1.5, this class of businesses is effectively run by sole proprietorships.

Adjusting for employment does little to correct this imbalance. Large businesses account for 14% of employment in this space (compared with 20% for hotels) whereas micro-enterprises are responsible for 60% of employment (compared with 16% for hotels).

 

Exhibit 20: EU alternative accommodation operations breakdown by enterprise size, 2016

 

When looking at revenue share of the alternative accommodations space, large enterprises retain a similar amount of relative control as do their hotel peers. Large providers of holiday and other short-stay accommodations accounted for 28% of sector revenue, compared to 24% for hotels.

The difference, again, lies with micro-enterprises. In alternative accommodations, micro-enterprises generate 42% of revenue, the second largest of any size category. This is compared to hotels where micro-enterprises only control 16% of revenue and small businesses 32%.

 

Exhibit 21: EU alternative accommodation revenue breakdown by enterprise size, 2016

 

In the traditional space, all SMEs report similar revenues per employee. In other words, you run a 20-staff hotel much the same as a 200-staff hotel; the efficiency gains only kick in for 600-person plus organizations. To us this implies that many of the efficiencies of scale provided to hotels come on the centralized marketing and distribution side.

In contrast, for alternative accommodations, even small gains in size result in scale efficiencies. The step-up from a micro-enterprise to a small business results in 54% higher revenue per employee (€62K per employee from €40k). Further growth to build a medium-sized enterprise will yield a further 33% improvement, all told 87% higher revenue per employee above the original micro-enterprise.

 

Exhibit 22: Illustrative example of how alternative accommodations can realize large efficiency gains with scale

 

We measured $4.4 billion of venture capital raised in the alternative accommodation space in 2018, growing at a 46% CAGR over the last five years. Much of this will go towards small businesses pursuing size through organic growth, and increasingly, consolidation. The step-function increases in vacation rental efficiency that we have measured here go a long way towards explaining the race for scale in the alternative accommodations sector that is occurring as we type.

Hotel Market Share by Country

Looking at hotels and other traditional accommodations, we can break down market share by country, and forecast out to 2020. The five largest geographical markets for hotels in the European Union are, in order: Germany, Spain, the United Kingdom, Italy, and France. Collectively these five nations represented €108 billion in sales, 69% of the EU market in 2017, the latest year for which historical data is available. We estimate that these markets are set to generate €116 billion in sales this year, 2019, and €119 billion by 2020. That is up from €82 billion in 2008.

The euro area (EA-19), the 19 nations that share the euro currency, is the largest bloc for traditional accommodations in the EU. It includes all top five markets, except the UK. We estimate that this bloc will make up 80% of sales in the EU this year.

 

Exhibit 23: EA-19 traditional accommodation market size, growth, and share, 2008–2020E

 

Germany is, by our estimates, the largest hotel market in the European Union. We estimate that it will generate €31 billion in sales this year, an 18% share. This share has been steady for most of the last decade, and we do not see it shifting significantly.

 

Exhibit 24: German traditional accommodation market size, growth, and share, 2008–2020E

 

Spain is the second largest hotel market in the EU, and the fastest growing among the top five markets for traditional hospitality. This means that Spain is gaining market share; we estimate that its €25 billion of sales in 2019 represents a 15% share, up from 13% a decade ago. And we forecast Spanish hotel revenue to grow by an impressive 6.4% next year as well.

 

Exhibit 25: Spanish traditional accommodation market size, growth, and share, 2008–2020E

 

The United Kingdom has seen more volatile growth, expressed in euro terms than other nations. This is largely because the pound exchange rate has been whipped around by, first shock, and then uncertainty regarding Brexit. The UK remains a large market, but we expect this volatility to continue and forecast the hotel market in the UK to shrink marginally. In a worst-case Brexit scenario, its hotel market could decline in significance, especially if trade ties to the European continent (which drives business travel) take a hard hit.

 

Exhibit 26: British traditional accommodation market size, growth, and share, 2008–2020E

 

Italy has posted a steady 12% market share for the last five years and we expect that to continue into 2019 and 2020. We see the Italian hotel market growing at a steady low-single digit clip to €20 billion this year and €21 billion the next.

 

Exhibit 27: Italian traditional accommodation market size, growth, and share, 2008–2020E

 

France is the smallest market for hotels of the big five in Europe, despite being one of the largest leisure travel destinations in the world. Don’t get us wrong though, we expect France to post an impressive €19 billion of hotel sales in 2019, an 11% market share. That’s about where the country has held for the last five years.

This is primarily explained by the outsized impact of alternative accommodations and campsites within the French hospitality sector. Just 68% of France’s total accommodations sector revenue is generated by hotels, that is the lowest fraction for any state in the entire European Union and compares with a bloc-wide average of 83%. France is the largest EU market for alternative accommodations (21% of total accommodations sector revenue vs. 11% EU average) and the second largest for campsites (11% vs. 5% EU average).

Hotels seem to have such a small relative accommodation share in France because it’s citizens, armed with given generous holiday leave, often choose to travel domestically and prefer these cheaper, self-service options.

 

Exhibit 28: French traditional accommodation market size, growth, and share, 2008–2020E

 

While we do not have market forecasts for each member state in the European Union, we do have historical data for all of them. This allows us to show EU market share by country for 2017, the latest year for which data is available. This includes market shares by not just revenue, but also by room nights, beds, and properties.

 

Exhibit 29: EU member state traditional accommodation market shares, 2017

 

We have also been able to retrieve key hotel performance indicators for all European Union member states including RevPAR, ADR, and occupancy. We have also estimated the contribution of foreign visits to the overall occupancy rate. For example, taking the EU-28 as a whole, foreign visitors contributed 51% of the overall occupancy rate, i.e. 41% of the overall 80% occupancy rate was accounted for by foreign visitors.

 

Exhibit 30: EU member state traditional accommodation performance indicators, 2017

 

Hotel Market Share by Company

Skift Research analyzed the public filings of 14 major publicly traded hospitality companies to understand their European exposure. Based on this, we have developed 2018 market share estimates for each respective company within the traditional accommodation category. These estimates are at the parent company level and represent the summation of all subsidiary brands. The estimates for revenue represent room revenue (e.g. hotel bookings) for these brands and not the franchise or management revenue earned by these corporations.

We believe that these 14 companies represent a collective €30 billion of room revenue, or just over 18% EU hotel market share. This public hotel bloc accounts for just about 4% of EU properties, but they tend to be larger than average with 133 rooms per hotel versus 34 rooms in the overall EU. This gives the bloc a nearly 17% share of total hotel rooms in the EU. These public hotel companies tend to, in aggregate, perform better than their independent peers. Taken together these 14 companies have a RevPAR index of 108, meaning that they cumulatively generated 8% higher RevPAR than the broader EU traditional hospitality sector. This could perhaps be reflecting gains from a larger scale and structured professional training programs.

These are naturally large corporate organizations with a deep bench of employees and fit under the large enterprise size category, representing hospitality business with 250 employees or more. Within this size grouping, we estimate that these 14 public companies represent 76% of room revenues earned by large hotel organizations.

 

Exhibit 31: Public hotel company EU traditional accommodation market shares, 2018E

 

Based on our estimates, Accor, through its many subsidiary brands, is the largest hotel chain in Europe. We estimate that it controls 4.5% of hotel revenue in Europe and 5.0% of rooms. Accor, by our estimates has more than twice as many rooms in Europe as does its next largest competitor. This speaks to the sweeping scale of the European hospitality company that owns brands including as Ibis, Novotel, and Sofitel. Accor’s widest reach comes in its economy and midscale offerings; this positioning also helps explain its lower RevPAR index compared to other public peers.

The second largest player by revenue is Marriott, which has a 2.9% share by revenue. It should be noted that, by rooms, Marriott is in third place. But Marriott’s European properties significantly outperform on RevPAR relative to the broader European market, measured by a RevPAR index of 170. In the U.S., we do not often think of Marriott as a predominantly luxury player. This class of properties makes up just 5% of its North American hotel rooms. But in Europe, Marriott has more than double the relative exposure to luxury than in North America. In Europe, luxury properties account for a bit over 12% of its room count. The resulting boost to ADR explains Marriott’s strong RevPAR and room revenue position within the EU.

In Europe it seems Accor has pursued room count even at the expense of RevPAR, while Marriott has made the opposite choice, earning a high RevPAR off a lower room and property count. If these companies represent two different business model extremes, then perhaps it could be said that InterContinental Hotel Group represents a Goldilocks-like middle way between these two, while still being a top-three heavy hitter. The London-based hospitality group ranks third for European hotel revenue, but second when counting by property or room count. It doesn’t quite have the same footprint of Accor, but with a RevPAR index of 108, it does a good deal better in sales per room than that company and outperforms the overall European hotel landscape. It doesn’t earn the massive RevPARs of a luxury Ritz-Carlton or St. Regis property, but it has a wider brand reach in Europe than Marriott does.

Methodology and Definitions

In-Scope Countries and Currency

This report covers businesses operating in the accommodation sector within the current member states of the European Union as of this report’s publication in September 2019. The 28 member states are:

Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom

At present the United Kingdom is scheduled to leave the European Union on October 31, 2019, but the date has been shifted several times already and the final details of “Brexit” are still being worked out. Given the substantial uncertainty surrounding this process, we continue to include the UK within the EU for the purposes of this report.

The most recent member to join the European Union was Croatia in July 2013. In cases where we present historical data, Croatia has been included retroactively for comparability. There have been no other enlargements to the EU that need to be accounted for within the span of our historical data which dates to 2008.

This means that some prominent European continental countries, like Switzerland, Norway, Iceland, and Russia, will be excluded from this report. This is done to maximize the quality and consistency of reported data. We further note that, for instance, including Switzerland would increase overall accommodation sector revenue by just under 4% in 2017 and have no impact on growth rates for that year. Given the relatively small impact of excluding these nations, we believe the trade-off of sticking with the vetted EU data is worthwhile.

All currency figures in this report are reported in euros and all other currencies have been converted to euros at annual average market exchange rates. At present there are 19 countries in the euro area that share this common currency, but the area has gone through multiple rounds of enlargements over the observation period of this report (there were 15 euro area members in 2008). As a result, accommodation revenue in certain nations, most notably the UK, will include the impact of currency fluctuations.

Sector Definitions

We split the accommodation market in the EU into three segments that conform to the NACE statistical classification of economic activities in the European community.

Hotels and similar accommodations represent traditional lodging arrangements, such as hotels, resorts, and motels. Services offered need to include daily cleaning and bed-making as the key differentiator.

Holiday and short-stay accommodations are what we sometimes call alternative accommodations. They are lodging spaces with included cooking facilities and without the aforementioned daily cleaning and bed-making services. This category includes apartments, bungalows, chalets, cottages, and cabins. It also includes youth hostels. But importantly excludes home rentals with daily housekeeping services provided.

The final category we include in our market sizing is camping grounds, recreational vehicle parks, and trailer parks. This excludes cabins and hostels which are counted in holiday and short-stay accommodations.

There is a fourth accommodation category tracked by the EU that covers other, miscellaneous, forms of accommodation. This other category is primarily rooms and/or dormitories for students and seasonal workers. We exclude this measure from our EU accommodation market size.

Sources

Skift Research’s accommodation sector estimates are based on our analysis of multiple third-party sources including Eurostat, the International Monetary Fund (IMF), and public company securities filings. These datasets were combined with our own internal data and insight aggregated from our previous reports and surveys.

The International Monetary Fund’s “World Economic Outlook” was used as our source for economy-wide GDP growth rates for the European Union and select countries. These baselines were translated into our own, proprietary Skift Research estimates for future growth in the accommodation sector.

From Eurostat, we accessed primarily the tourism satellite account and the structural business statistics for the European Union. These are European-wide aggregations of data reported by each member state’s respective national statistics institute. The data is collected through a combinational of surveys, business registers, and administrative sources (e.g. tax receipts) depending on the exact measurement and country. In the case of most countries, large businesses are completely enumerated while small business estimates are extrapolated from a smaller sample.

This methodology means that it only captures data from officially incorporated as businesses that show up on government registers. As such, it excludes much of the “sharing economy” of unregistered homesharing listings on Airbnb and other similar sites.

To correct for this undercount, Skift Research generated our own estimates for the size of the sharing economy in alternative accommodations from 2011 (the start of Airbnb’s international expansion) onward. These estimates are included in our total market estimates for accommodation revenue in the European Union.

However, we do not have operational statistics or other key performance indicators for the sharing economy in alternative accommodations. As such, when these metrics (enterprise count, establishment count, operating margin, RevPAB, Occupancy, and ADR) are presented for alternative accommodations, they are presented excluding the sharing economy. Further, it is not even clear that traditional performance indicators, such as occupancy rates, have the same relevance for shared rooms and apartments as they do for professionally run accommodations.

We believe that the impact from excluding the sharing economy is minimal as we estimate that, even on Airbnb, most bookings come from professional property managers captured by structural business statistics. Our estimate is that, in Europe, 26% of Airbnb, 9% of alternative accommodations, and 1% of overall accommodations bookings are generated by the sharing economy.

Further Skift Research Market Estimates and Forecasts