August 14, 2022

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Hotel, tourism |  New report: hotel prices in Oslo explode

Hotel, tourism | New report: hotel prices in Oslo explode

The Benchmarking Alliance analyzed room rates and room occupancy in Norway based on 61,000 rooms. The report shows that the average price in Oslo including Fornebu rose from approx. From 800 NOK in the first half of 2021 to 1,300 NOK in the first half of this year. In addition, there is a value-added tax (12 percent), as well as breakfast. This brings the total room rate to 1600-1,700 NOK.

Hotels in Oslo saw a 16.6 percent increase in prices over the first half of 2019 and 60.8 percent over the first half of last year. On the other hand, the room occupancy rate in Oslo was 17.4 percent lower than it was in the first half of 2019.

Prices consist of the relationship between supply and demand. 60 percent is a lot, yes, but it was a very low last year, hotel consultant Peter Wiederström tells Nettavisen. He analyzed the figures in the report from the Benchmarking Alliance.

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big limitations

The first half of 2021 was marked by the Corona pandemic. 2019 is another normal year in the hotel and tourism industry, then the pandemic has been ruined from March 2020.

In an SMS to Nettavisen, communications director Bettina Flatland at Nordic Choice Hotels wrote that the past year has been marked by Oslo’s tight restrictions. This affected the price picture.

– In Oslo this year, we saw higher demand than we saw in 2019. The evolution of prices comes as a result of capacity pressures, as well as a general increase in prices as a result of increased costs of goods and services, Flatland writes.

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Hello

She believes that the possibility of holding both conferences and cultural events is welcome for the entire tourism industry, and that more tourists characterize the city’s scenery.

There are many good reasons to attract people to Oslo this summer. But we note that the development of the Pjorvika district and the cultural offering of the capital are attracting more and more guests to the city. This applies whether they come from afar or stay in a hotel in their hometown.

Hotels, like other companies, are struggling with high electricity prices and strong price increases in general. When asked about how much the price will increase due to the higher cost, Wiederström replied:

Hotel cost growth is phenomenal, including energy, food, and staff. Interest rates are also going up, and of course that should be covered.

He will not expect whether hotel prices will rise further in the second half of the year.

more effective

For hotels, it is of course important to fill the rooms in order to earn money. During the Corona pandemic, occupancy dropped to 10-20 percent (see below), and then it became impossible to make money. But Wiederstrøm will not put a precise limit on profitability.

– This depends on many things, including room rate, other turnover, and cost structure. It is almost impossible to say anything in general about how large the occupancy should be, other than that hotels are much more efficient now than they were in the past. This means you can afford a lower occupancy rate than before, says Wiederstrøm.

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We normally expect the hotel to have 20 percent occupancy so we can defend the process if we ignore the rent. In terms of rent, we’re talking about up to 40 percent.

– To cover other financial costs and depreciation, the occupancy rate must be up to 50 percent, Christian Reingis told Nettavisen two years ago. He emphasized that these figures are very approximate.

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Growth is everywhere

According to the latest report, all 13 major cities have experienced room rate growth since the first half of last year. In up to 12 of the 13 cities, there has been price growth since the first half of 2019.

All hotels in Bergen, Stavanger and Trondheim have good nominal room rate growth in the first half of the year, i.e. actual price growth.

When measured, this applies to both the first half of 2019 and the first half of last year. Hotels in large regional cities have managed to increase room occupancy from the first half of last year, but must endure a decrease in occupancy from the first half of 2019.

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weak in winter

Consequently, Oslo experienced a decrease in room occupancy in the first half of the year compared to the last normal year 2019.

– Because January and February of this year were very weak, Wiederstrøm comments.

The central target number for hotels is “accommodation revenue per available room”, or the so-called RevPAR. This means a turnover for each available room:

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The turnover is divided by the total number of rooms available in the hotel and depends on the rate and occupancy of the room. The higher the RevPar, the better. If the average room cost is NOK 1,000 and occupancy is 50 percent, the RevPar is NOK 500, NOK 1,000 if the hotel is fully booked.

The RevPar rate for the first half of the year is up 4.1 percent compared to the first half of 2019. This headline figure is up a whopping 152 percent compared to the first half of last year, which shows how important it is to fill rooms.

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Double occupancy of the room

Other than that, the report shows that all 13 of the big cities on the list have seen room occupancy growth since the first half of last year. Most cities have about double (see chart below). The blue graph shows the evolution for 2022.

However, room occupancy rate in only 3 out of 13 Norwegian cities was higher in the first half of this year than in the first half of 2019.

However, Wiederstrøm interprets the numbers as showing that the hotel industry is showing signs of returning to normal, at least in terms of turnover statistics. But other than that it means a lot unnatural, too in the industry.