Colliers Market Report Denmark 2023

Hotel - Colliers Market Report 2023

106

Occupancy rates rebounding on the heels of COVID-19 restrictions and strong supply growth

1 4

82 %

27 %

12

85 %

86 %

10

8

6

4

2

0

17

19

20

18

Demand

Supply

Estimated demand

Note: Annual hotel bed supply versus annual hotel bed demand, Copenhagen proper. Million beds (l.a.). Percentage above columns = occupancy rates. Supply: Number of available beds in a given year. Demand : Number of beds sold in a given year. For 2023 and 2024 supply is estimated based on pipeline figures. Source : Statistics Denmark, Benchmarking Alliance, Colliers

Slowdown in new Copenhagen hotel supply Over the first seven or eight years of the previous dec ade, Copenhagen occupancy rates were on the rise, with the increase in hotel demand outpacing new hotel sup ply. In other words, the Copenhagen hotel market was booming. Against this backdrop, along with favoura ble revenue indicators, a string of hotel development schemes was launched for completion in the period before and during the pandemic. This has exacerbated the adverse effect on occupancy rates, which were doubly hit by plummeting demand along with a sharp increase in supply in the period. As the pandemic is gradually becoming a thing of the past, however, we expect demand to rebound, already supported by the unprecedented number of bednights in 2022. This suggests that the increase in tourism is a long lived trend, set to restore the supply and demand balance. Occupancy rates will thus rebound to previous highs.

is highly cyclical. In times of crisis, the number of tourists and, more importantly, business travellers will decline because businesses often choose to scale down travel activity during an economic downturn. Previous economic downturns have sent the hotel indus try into severe crisis: Both in 2001-2003 (following the 9/11 terrorist attacks) and some years later during the financial crisis, Copenhagen witnessed a boom in hotel building along with low occupancy rates. Nonetheless, hotel occupancy rates each time edged up once market conditions improved. Once the economy rebounds, we therefore expect occupancy rates to rise, with room rates following suit. This is also supported by a relatively moderate pipeline of new Copenhagen hotels as the pandemic made inves tors and operators put the brakes on several develop ment schemes. Whereas some 5,000 new hotel rooms were added in Copenhagen during the two corona years, the outlook for the next three years is for much reduced added supply.

Nevertheless, a recession could trigger an opposing trend, severely dampening demand as the hotel industry