Hotels & Hospitality. Hotel Intelligence Florence

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1 Hotels & Hospitality Hotel Intelligence Florence 2013 Considered one of the most beautiful cities in the world, hotel trading in Florence remained surprisingly robust throughout 2012 despite Italy s on-going economic difficulties. After a solid rise in occupancy levels in the first seven months of 2013, the Florence hotel market is expected to continue improving throughout the year, supported by increasing demand from the BRIC nations.

2 2 Hotel Intelligence: Florence Table of Contents Contributors Market Snapshot Overall tourism demand contracted while international tourism peaked in Sara Ferrajoli Associate, Italy sara.ferrajoli@eu.jll.com Strong overall growth at Venice airports in International meetings grow in Venice in International tourism expected to fuel growth in Stable hotel supply in the city driven by boutique hotels Subdued growth in hotel trading performance in 2012, growth expected for Alexander French Research Assistant, EMEA alexander.french@eu.jll.com Notable growth expected in the short term 10 Jones Lang LaSalle s Hotels & Hospitality Group serves as the hospitality industry s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research. For more news, videos and research from Jones Lang LaSalle s Hotels & Hospitality Group, please visit:

3 Hotel Intelligence: Florence 3 Market Snapshot Tourism: The tourism market in Florence is heavily dependent on international leisure visitors, who accounted for 77% of total bed nights in Tourism demand to the city achieved significant growth rates in 2010 and 2011, reaching an all-time peak of almost 6.4 million overnight stays by the end of Results in 2012 were less promising, driven by a reduction in domestic demand due to the continued weakness of the Italian and European economies. Demand for upscale hotels reported positive growth, whereas a reduction was recorded in the number of bed nights to lower tier hotels. Supply: At March 2013, the graded hotel supply in Florence comprised 378 hotels, offering a total of about 14,100 guest rooms, which is in line with the previous year. The majority of hotels are concentrated in the 3 and 4-star segments, accounting for approximately 80% of all graded hotel rooms in the city. In light of very tight planning regulations, hotel supply is not expected to increase significantly in the foreseeable future. Trading: Florence s hotel market recovered quickly from the dip in performance in 2008 and 2009, and hoteliers reported an impressive 10.2% growth in revenue per available room (RevPAR) by the end of In 2011 trading performance remained very robust, with hoteliers posting a further 16.1% appreciation in RevPAR, one of the highest growth rates in Italy. Performance remained stable in 2012, with RevPAR substantially unchanged ( 0.7%) compared to the previous year, as a result of a slight decrease in both occupancy and average daily rate (ADR). In spite of the euro crisis, hoteliers saw a further growth in performance at year-to-date May 2013, driven by a rise in occupancy of 8.5%.

4 Arrivals (000s) Bed Nights (000s) 4 Hotel Intelligence: Florence Florence remains a key leisure destination Florence: Tourism Trends Source: Provincia di Firenze CAAG (%) Visitor Arrivals (000s) Domestic International 1,616 1,714 1,755 1,588 1,498 1,862 1,995 2, Total 2,296 2,405 2,465 2,287 2,196 2,594 2,724 2, Growth p.a. (%) Bed Nights (000s) Domestic 1,422 1,510 1,461 1,432 1,475 1,457 1,498 1, International 4,060 4,187 4,275 3,961 3,765 4,546 4,926 4, Total 5,482 5,697 5,736 5,393 5,240 6,002 6,424 6, Growth p.a. (%) Florence: Tourism Demand 3,000 2,500 2,000 1,500 1, Visitor Arrivals Bed Nights Source: Provincia di Firenze 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Florence: Top Feeder Markets 2012 vs Brazil Russia Germany UK Japan France Spain USA ,000 1,200 Visitor Origin 2012 Bed Nights 000's Source: Provincia di Firenze Birthplace of the Italian Renaissance, Florence was the most important city in Europe for around 250 years. Florence is considered a cultural, artistic and architectural gem, and it contains a high concentration of works of art for the size of the city. Florence has been an international tourism demand generator for centuries and is heavily dependent on international leisure tourism, which is concentrated between April and September proved to be a record year for the city in terms of arrivals and overnight stays, with annual growth of 5.0% and 7.0%, respectively. This was driven by a strong growth from the international markets, although a solid result was also recorded for the domestic component, especially in the first 9 months of the year. At year-to-date March 2013, domestic demand had weakened further, whereas international arrivals and bed nights reported positive results compared to the same period in International demand accounted for around 77% of all bed nights in 2012, in line with its market share in 2010 and Florence s major foreign source markets include the USA, Japan, Spain, the UK and France. In recent years, demand from Brazil, Russia and China has been increasing considerably.

5 Hotel Intelligence: Florence 5 Decrease in domestic passengers at Florence airports Florence Airports: Passenger Arrivals 7,000 6,000 5,000 4,000 3,000 2,000 1, YTD May YTD May Pisa Airport Florence Airport As of May 2013, Pisa airport had experienced a decrease in passenger arrivals compared to the same period in 2012, boosted by a significant decrease in domestic passengers ( 10.0%). A strong contraction in domestic passengers was also registered at Florence airport ( 14.3%), which had been offset by the 5.7% increase in international passengers, resulting in a 1.8% increase compared to the same period in Trade fair and exhibition demand Source: Assaeroporti Pisa s Galileo Galilei international airport is considered the major Tuscan airport due to the size of its runways, which enable large long-haul carriers to land. Pisa s airport is located 80 km from Florence and handles the majority of the low-cost and international air traffic in the region. The airport is served by 17 airlines, offering flight connections to 78 national and international destinations. A handful of European and domestic flights serve Florence s smaller Amerigo Vespucci airport, situated just northeast of the city, close to the A1 and A11 motorways, in the rapidly developing commercial and industrial district of Peretola. During the global financial crisis, total arrivals at the Florence airports fell by only 3.1% (2009). Passenger numbers recovered from the crisis very quickly, with a year-on-year increase of 1.7% in In 2011, passenger activity exceeded the previous year by 11.0%, with new record passenger levels of 4.5 million at Pisa and 1.9 million at Florence. International passengers recorded a robust growth and continue to dominate passenger movements, accounting for 71.2% of the total volume at Pisa and 78.3% at Florence in In 2012 passenger arrivals declined by 1.3% compared to the previous year. The decline in volume was largely a result of the generally weaker domestic economy, with the strongest contraction recorded for domestic traffic at Florence airport. Located in the northern area of the city, just a few steps away from Santa Maria Novella railway station, Florence s trade fair and exhibition centre comprises three distinct venues, Fortezza da Basso, Palazzo degli Affari and Palazzo dei Congressi, with a total covered area of 60,000 sq. m, the largest single area being 11,300 sq. m. The exhibition area can accommodate roughly 20,000 delegates with about 3,500 in the largest single area. Together, the venues host a number of international fairs, exhibitions and congresses, but their contribution to the city s total bed nights is currently limited compared to other cities, such as Milan and Bologna. Major events include Pitti Immagine Uomo, organised twice a year in January and June, the Mostra Internazionale dell Artigianato, dedicated to the craft sector in April, the Salone del Mobile di Firenze in March and DanzainFiera in February. In 2012 Florence s trade fair venues hosted 22 exhibitions and 125 congresses, resulting in 99 and 244 days of activity, respectively. The city also offers an additional exhibition area, the Stazione Leopolda, which is managed by Pitti Immagine. With a covered area of approximately 6,000 sq. m., the venue hosts a number of corporate conventions, fashion shows, exhibitions, fairs and musical events. Greater efforts to position Florence as an internationally renowned trade fair destination will support the city in capturing corporate demand, which it is currently lacking.

6 Bedrooms 6 Hotel Intelligence: Florence Slow-down in the supply pipeline Florence: Hotel Developments (as at July 2013) Recently Opened in 2013 Hotel Name Location Rooms Grade Due Date Operator Villa Tolomei Hotel & Resort Marignolle 31 5 star Q Isotel Sarl/Exen Spa/ So.Ge.A srl. Room Mate Isabella Via dei Tornabuoni City Centre 22 4 star Q Room Mate Hotels Room Mate Luca City Centre 53 4 star Q Room Mate Hotels Total Rooms Recently Opened 106 New Developments Hotel Location Rooms Grade Due Date Operator Andaz Florence (Hyatt) City Centre star 2014 Aled/Park Hyatt Hotel Project Viale Belfiore Viale Belfiore star 2015 n.a. Hotel Project Via Pefetti Ricasoli Via Perfetti Ricasoli 79 4-star 2015 n.a. Proposed Ex Cinema Apollo Via Nazionale 80 4-star n.a. Tecam San Paolino Hotel & Resorts City Centre star n.a. Tecam Hotel Project Mercafir Area Mercafir n.a. n.a. n.a. n.a. Total Rooms Proposed/Under Construction n.a = not available Source: Jones Lang LaSalle Hotels & Hospitality Florence: Hotel Supply (as at March 2013) Grade Establishments Rooms % of Total 5-star % 4-star 88 6, % 3-star 147 4, % Other 130 1, % Total ,098 Source: Jones Lang LaSalle Hotels & Hospitality Florence currently has 378 graded hotels with about 14,100 guest rooms. The majority of hotels are concentrated in the 3 and 4-star segments, accounting for approximately 80% of all graded hotel bed stock in the city. Over the last decade, hotel supply growth has mainly been fuelled by an increase in the 4 and 5 star segments, recording a compound annual average growth (CAAG) rate of 5.5%, whilst the number of rooms below 3 star has reduced by about 790 units, indicating an overall improvement in the quality of accommodation being offered in the city. The market is dominated by independent hotels, in line with the rest of the Italian hotel market; however, over the years various domestic and international operators have entered the Florence hotel market. Florence: Hotel Supply 14,500 14,000 13,500 13,000 12,500 12, f 2014f Developments f = forecast Source: Jones Lang LaSalle Hotels & Hospitality Existing International operators such as Starwood, Rocco Forte and Four Seasons are well represented in the 5-star segment, whilst the 4-star segment is dominated by both international (Hilton, Marriott, InterContinental Hotels Group, Accor and NH Hoteles) and domestic operators (UNA Hotels & Resorts, Starhotels, Boscolo and SINA Hotels). In 2013, the Spanish hotel group, Room Mate Hotels, inaugurated two new hotels in Florence city centre; the Room Mate Isabella (22 rooms) and the Room Mate Luca (53 rooms), through the conversion of two existing hotel properties.

7 (2012 values) Occupancy Hotel Intelligence: Florence 7 The new urban planning regulations in the city of Florence prohibit the development of new hotels in the city centre. Due to this very tight restriction and the scarce availability of land, hotel supply is not expected to change by a considerable amount in the foreseeable future. Results in 2013 anticipate growing trading performance Florence is primarily a leisure destination, which had historically achieved one of Italy s highest occupancy levels (before 11 September 2001). However, 2001 represented the last year in the decade with occupancy above 70%; due to the heavy reliance of the city on international demand, overall trading suffered greatly during the period post-9/11 and again during the recent global economic downturn (2008 and 2009). Trading performance recovered quickly in 2010, however, with occupancy and ADR rising by 8.0% and 2.0% respectively. Growth in hotel performance continued into 2011, driven by a further improvement of 8.9% in occupancy levels and 6.6% in ADR, posting an impressive double-digit growth rate of 16.1% in RevPAR, one of the highest increases in Italy. Hotel performance at year-end 2012 remained stable, with RevPAR substantially unchanged (-0.7%) compared to 2011, as a result of a slight decrease in both occupancy and ADR. At year-to-date July 2013, hoteliers in Florence had enjoyed a rebound in performance, with occupancy rising by 7.4%, whereas room rates remained substantially unchanged compared to the same period in Florence: Quality Hotel Trading Source: STR Global Florence Year-to-Date Trading July Change (%) Occupancy (%) ADR ( ) RevPAR ( ) Source: STR Global The table below shows that average occupancy has been slightly lower in the last 5 years than over the last 10 years. However, performance results in terms of average room rates are almost in line over both periods analysed, indicating that hoteliers have recently managed to recover room rate levels. Florence Trading Growth Rates Occupancy (%) ADR CAAG (%, 2012 values) RevPAR CAAG (%, 2012 values) Source: STR Global % 80% 60% 40% 20% ADR 2012 values ( ) RevPAR 2012 values ( ) Occupancy 0% Florence: Hotel Trading Performance Occupancy (%) ADR ( ) RevPAR ( ) RevPAR growth (%) Inflation (%) ADR 2012 values ( ) RevPAR 2012 values ( ) Note: Selection of 4 to 5 star hotels Source: STR Global

8 8 Hotel Intelligence: Florence Florence Quality Hotels: Room Yield Seasonality Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: STR Global Florence tends to have a seasonal performance, with room yield peaks during spring and autumn and lower rates during the summer months. International demand should assist hotel performance in 2013 Florence is considered one of the most beautiful cities in the world due to its vast array of monuments, architecture, art galleries and museums, which together make the city an internationally renowned destination. The city s hotel industry has seen a strong recovery since the economic crisis of 2008 and Hotels have increased their RevPAR significantly since then, boosted by an improvement in domestic and international demand. Following a positive performance in 2011, with growth in tourism demand reflected in increases in occupancy rates, hotel performance in 2012 remained largely stable. The Florence hotel market is expected to improve in 2013, as highlighted by the significant increase in occupancy rates in the first 7 months of the year. The combined effect of limited new supply in the historic centre and Florence s strong reliance on international demand, including increasing demand from the BRIC countries (Brazil, Russia, India and China), should assist the long-term trading fundamentals of the city.

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