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Hotel Intelligence Florence 2013

Hotels & Hospitality

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 Hotel Intelligence: Florence

Contributors Table of Contents Market Snapshot Overall tourism demand contracted while international tourism peaked in 2012 Strong overall growth at Venice airports in 2012 International meetings grow in Venice in 2012 International tourism expected to fuel growth in 2013 Stable hotel supply in the city driven by boutique hotels Subdued growth in hotel trading performance in 2012, growth expected for 2013 Notable growth expected in the short term

Alexander French Research Assistant, EMEA [email protected]

Sara Ferrajoli Associate, Italy [email protected]

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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 pro-vide 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: www.jll.com/hospitality

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 2012. 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 2011.

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 2010. 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%.


Florence remains a key leisure destination

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.

2011 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 2012.

International demand accounted for around 77% of all bed

nights in 2012, in line with its market share in 2010 and 2011.

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.

Source: Provincia di Firenze

Florence: Tourism Trends

2005 2006 2007 2008 2009 2010 2011 2012

CAAG 2005–12

(%)

Visitor Arrivals (000s)

Domestic 680 691 710 699 698 733 729 726 0.9

International 1,616 1,714 1,755 1,588 1,498 1,862 1,995 2,019 3.2

Total 2,296 2,405 2,465 2,287 2,196 2,594 2,724 2,745 2.6

Growth p.a. (%) 8.4 4.7 2.5 -7.2 -4.0 18.1 5.0 0.8

Bed Nights (000s)

Domestic 1,422 1,510 1,461 1,432 1,475 1,457 1,498 1,480 0.6

International 4,060 4,187 4,275 3,961 3,765 4,546 4,926 4,883 2.7

Total 5,482 5,697 5,736 5,393 5,240 6,002 6,424 6,364 2.2

Growth p.a. (%) 2.4 3.9 0.7 -6.0 -2.8 14.5 7.0 -0.9


Florence: Tourism Demand

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4,000

5,000

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7,000

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00s)

Visitor Arrivals Bed Nights

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USA

Spain

France

Japan

UK

Germany

Russia

Brazil

Bed Nights 000'sVisitor Origin 2012

Florence: Top Feeder Markets 2012 vs. 2011



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 2010. 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

2011.

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.

Decrease in domestic passengers at

Florence airports

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.

0

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6,000

7,000

2005 2006 2007 2008 2009 2010 2011 2012 YTDMay2012

YTDMay2013Pisa Airport Florence Airport

Source: Assaeroporti

Florence Airports: Passenger Arrivals

Trade fair and exhibition demand

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

2012.


Slow-down in the supply pipeline

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.

Source: Jones Lang LaSalle Hotels & Hospitality

Florence: Hotel Supply (as at March 2013)

Grade Establishments Rooms % of Total

5-star 13 882 6.3%

4-star 88 6,774 48.0%

3-star 147 4,617 32.7%

Other 130 1,825 12.9%

Total 378 14,098 –

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.

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 Q1 2013 Isotel Sarl/Exen Spa/ So.Ge.A srl.

Room Mate Isabella Via dei Tornabuoni – City Centre

22 4 star Q1 2013 Room Mate Hotels

Room Mate Luca City Centre 53 4 star Q2 2013 Room Mate Hotels

Total Rooms Recently Opened 106

New Developments 2014–2015

Hotel Location Rooms Grade Due Date Operator

Andaz Florence (Hyatt) City Centre 100 4-star 2014 Aled/Park Hyatt

Hotel Project Viale Belfiore Viale Belfiore 250 4-star 2015 n.a.

Hotel Project Via Pefetti Ri-casoli

Via Perfetti Ricasoli 79 4-star 2015 n.a.

Proposed – Ex Cinema Apol-lo

Via Nazionale 80 4-star n.a. Tecam

San Paolino Hotel & Resorts City Centre 100 5-star n.a. Tecam

Hotel Project Mercafir Area Mercafir n.a. n.a. n.a. n.a.

Total Rooms Proposed/Under Construction 2014–2015

600+

n.a = not available Source: Jones Lang LaSalle Hotels & Hospitality

Florence: Hotel Supply

f = forecast Source: Jones Lang LaSalle Hotels & Hospitality

12,000

12,500

13,000

13,500

14,000

14,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f

Bed

roo

ms

Developments Existing


Results in 2013 anticipate growing

trading performance

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.

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 2012.

Note: Selection of 4 to 5 star hotels Source: STR Global

Florence: Hotel Trading Performance

2005 2006 2007 2008 2009 2010 2011 2012

Occupancy (%) 67.1 68.0 67.4 58.0 55.0 59.4 64.7 64.4

ADR (€) 209.3 219.8 224.2 215.0 199.6 203.6 217.1 216.4

RevPAR (€) 140.5 149.4 151.1 124.6 109.8 120.9 140.5 139.4

RevPAR growth (%) 0.1 6.3 1.2 -17.6 -11.9 10.2 16.1 -0.7

Inflation (%) 2.0 2.5 2.0 3.3 0.8 1.6 2.8 2.3

ADR 2012 values (€) 243.4 249.4 257.7 231.5 213.2 214.1 222.1 216.4

RevPAR 2012 values (€) 163.3 169.5 168.2 134.2 117.3 127.2 143.7 139.4

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

2003–12 2008–12

Occupancy (%) 63.6 60.3

ADR CAAG (%, 2012 values) -1.8 -1.7

RevPAR CAAG (%, 2012 values) -1.7 1.0

Source: STR Global

Florence Year-to-Date Trading

July 2012 2013 Change (%)

Occupancy (%) 63.7 68.5 7.4

ADR (€) 224.7 224.4 -0.1

RevPAR (€) 143.2 153.6 7.3

Source: STR Global

Source: STR Global

Florence: Quality Hotel Trading

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2005 2006 2007 2008 2009 2010 2011 2012

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ADR 2012 values (€) RevPAR 2012 values (€) Occupancy


International demand should assist

hotel performance in 2013

Florence tends to have a seasonal performance, with room yield peaks during spring and autumn and lower rates during the summer months.

Source: STR Global

Florence Quality Hotels: Room Yield Seasonality

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2010 2011 2012

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 2009. 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.

Hotel Intelligence: Florence

This report is confidential to the recipient of the report. No reference to the report or any part of it may be published in any document, state-ment or circular or in any communication with third parties without the prior written consent of Jones Lang LaSalle Hotels & Hospitality, including specifically in relation to the form and context in which it will appear. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions in respect of a considerable number of varia-bles which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome and we draw your attention to this factor. Jones Lang LaSalle Hotels & Hospitality makes no representation, warranty, assurance or guarantee with re-spect to any material with which this report may be issued and this report should not be taken as an endorsement of or recommendation on any participation by any intending investor or any other party in any transaction whatsoever. This report has been produced solely as a general guide and does not constitute advice. Users should not rely on this report and must make their own enquiries to verify and satisfy themselves of all aspects of information set out in the report. We have used and relied upon information from sources generally regarded as authoritative and reputable, but the information obtained from these sources may not have been independently verified by Jones Lang LaSalle Hotels & Hospitality. Whilst the material contained in the report has been prepared in good faith and with due care, no representation or warranty is made in relation to the accuracy, currency, completeness, suitability or otherwise of the whole or any part of the report. Jones Lang LaSalle Hotels & Hospitality, its officers, employees, subcontractors and agents shall not be liable (to the extent permitted by law) to any person for any loss, liability, damage or expense (‘liability’) arising directly or indirectly from or connected in any way with any use of or reliance on this report. If any liability is established, notwithstanding this exclusion, it shall not exceed $1,000.


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