HVS Resort Market Report – Florence, Italy

This text examines Florence’s tourism business resilience amidst crises, together with the COVID-19 pandemic, analyzing key efficiency indicators corresponding to airport statistics, lodge provide, and working efficiency. Regardless of setbacks, Florence witnessed a exceptional restoration, notably in 2023, with record-breaking Income Per Accessible Room (RevPAR). The evaluation additionally highlights funding tendencies and future challenges, together with considerations about over-tourism and evolving market dynamics.

Introduction

Town of Florence underwent a sustained interval of tourism development spanning over a decade, navigating varied crises, together with the 2008 monetary disaster and subsequent financial recession in Italy, in addition to the 2015 terrorism risk in Europe. Nonetheless, the emergence of the COVID-19 pandemic marked a big turning level. Like most locations globally, Florence confronted substantial challenges because of the pandemic and related journey restrictions. However, with the profitable implementation of vaccination campaigns and the gradual leisure of the containment measures all through Europe and the US, vacationer numbers began to rebound as of April 2022. Town’s key efficiency indicators witnessed a exceptional enchancment, culminating in 2023 rising as a record-breaking yr when it comes to Income Per Accessible Room (RevPAR).

Financial Indicators – Italy

Supply:  European Fee

Airport Statistics

Previously often known as Amerigo Vespucci Airport, Florence Peretola serves as the first worldwide gateway to Florence and stands as Tuscany’s second-largest airport by passenger quantity, following Pisa Worldwide Airport. From 2012 to 2019, the airport skilled sustained development, with a Compound Annual Progress Price (CAGR) of 6.5%, primarily because of the rising variety of worldwide vacationers. Following the pandemic’s impression, the restoration started slowly in 2021 and gained momentum in 2022. As of the top of 2023, the restoration is full, with passenger site visitors having surpassed the 2019 figures by 7.1%. In distinction, Pisa Worldwide Airport, which noticed a CAGR of two.6% from 2012 to 2019, continues to be 5.2% under its 2019 ranges. Nonetheless, Pisa stays the area’s main airport, with an annual passenger motion exceeding 5 million, in comparison with Florence’s roughly 3 million passengers.

Passenger Motion – Florence Peretola Airport (000s)

Supply: Assaeroporti

Tourism Demand

Between 2013 and 2019, lodge arrivals and bednights in Florence noticed regular development charges of 1.2% and three.1% yearly, respectively. This development was primarily pushed by an increasing home market recovering from the monetary disaster. Consequently, gross mattress occupancy rose from 56% to 65%. Nonetheless, in 2020, arrivals and bednights skilled a pointy decline of roughly 80%. By the top of 2022, arrivals and bednights had recovered to 78% and 66% of 2019 ranges, respectively. Preliminary knowledge as much as October 2023 point out an additional 20% year-on-year enhance in each metrics, demonstrating sustained momentum. Nonetheless, by year-end, we anticipate arrivals and bednights to nonetheless be under 2019 ranges by 10% and 20%, respectively.

The discrepancy in restoration charges between lodge arrivals and airport passenger motion could be attributed to rising competitors from the extra-hotel market, significantly trip houses and farmhouses, which skilled vital development following the pandemic. Moreover, this shift led to a noticeable lower within the common size of keep at resorts, declining from 2.6 days in 2019 to 2.2 days in 2023.

By way of nationality, the first supply marketplace for Florence resorts in 2022 was the US, pushed by a good euro/greenback trade price, adopted by France and the UK. Nonetheless, Asian nations, notably China, have but to completely return to pre-pandemic ranges.

Accommodated Resort Bednights and Gross Mattress Occupancy (000s)

Supply: Regione Toscana

Resort Provide and Pipeline

The lodge provide in Florence remained secure between 2014 and 2019 when it counted 391 resorts and 14,883 rooms. It’s price noting that all through the identical interval, the four- and five-star segments grew when it comes to resorts (at a CAGR of 4.2% and three.3%, respectively) and rooms (CAGR of two.5% and a couple of.6%), whereas provide within the decrease segments skilled a gentle decline. This sample signifies a shift towards the higher market spectrum. The COVID-19 disaster additional accelerated this transition, driving out a number of resorts within the decrease market segments. Consequently, the lodge provide shrunk between 2019 and 2022 by 38 resorts and 1,017 rooms.

The typical dimension of Florence resorts is comparatively small when it comes to rooms. 5-star and four-star resorts common 60 and 70 rooms, respectively, whereas decrease classes common round 22 rooms.

Resort Provide 2014-22

Supply: ISTAT

Resort Rooms Provide 2022

Supply: ISTAT

Trying forward, Florence has a strong pipeline of round 2,000 rooms (roughly 14% of the prevailing provide), primarily within the four- and five-star segments, that includes a number of worldwide manufacturers, together with famend ultra-luxury names like Auberge Resorts and Baccarat, in addition to additions from Marriott, Hilton, Accor, IHG and Radisson. Notably, The Social Hub Belfiore alone is about to contribute 652 rooms to the market.

There are additionally a couple of resorts which are about to be revamped, like the 2 Room Mate resorts (Room Mate Luca and Room Mate Isabella) which are at present present process renovations, and the NH Assortment Palazzo Gaddi that’s rebranding as a Tivoli Inns and Resorts (each manufacturers are below Minor Inns).

Different noteworthy tasks at present below dialogue in Florence embody the “ex-Scuola di Sanità Militare Vittorio Veneto”, which was bought by Argentinian tycoon Alfredo Lowenstein and is envisioned to be transformed right into a luxurious resort, and the “ex-Ospedale San Gallo”, bought by GB Make investments, which is deliberate be transformed in a mixed-use institution with non-public residences and a five-star lodge.

Resort Pipeline

Supply: HVS Analysis

Resort Working Efficiency

Inspecting a pattern of roughly 3,000 luxurious and higher upscale guestrooms reveals the exceptional restoration trajectory of the Florence lodge market. In 2020, the impression of the COVID-19 pandemic led to a big drop in occupancy and a 25% lower in common charges. The next yr 2021 noticed a partial rebound in occupancy ranges (nonetheless under half of 2019), whereas the pattern totally regained the misplaced floor in Common Each day Price (ADR). In 2022, fueled by inflationary pressures and the return of worldwide vacationers, significantly from the US, common charges surged by 43%. Regardless of occupancy ranges nonetheless trailing 2019, RevPAR exceeded 2019 figures by 23%. In 2023, the upward ADR push continued (+16% year-over-year), reaching €466, and concurrently occupancy totally recovered. Consequently, RevPAR skilled a 34% year-over-year enhance and a powerful 64% surge since 2019.

KPIs – Higher Upscale and Luxurious Inns 2019-23

Supply: HVS Analysis

Resort Funding Market

Regardless of being one of many “Massive 4” vacationer markets in Italy, the small common dimension of the resorts in Florence has historically discouraged sure worldwide and institutional traders, who usually search bigger economies of scale. Nonetheless, because of the latest enhancements in lodge efficiency, the market has change into more and more interesting to the sort of investor, who’s now prepared to contemplate properties with a decrease room depend. The desk shows 18 of probably the most noteworthy transactions that occurred between 2015 and 2023. The biggest transaction was the 2016 twin acquisition of the and the by Qatari non-public investor Jaidah Holdings from Starwood Inns and Resorts (now Marriott) for €190 million (€701 thousand per room), whereas the best worth per room was achieved by in 2019 (€1,627,083). The latest transaction on our data is the sale of the Novotel Firenze Nord Aeroporto, in October 2023.

Resort Transactions 2015-23

Supply: HVS Analysis

Outlook Florence

The lodge business is quickly evolving, reaching new ranges of sophistication. This problem spans from enhancing on-line presence to bettering in-house visitor experiences and bodily lodging. Nonetheless, many resorts, particularly these in decrease market segments, battle to maintain up with the modifications as a result of restricted monetary assets. Consequently, some resorts are discovering themselves edged out of the market. In distinction, various lodging like trip houses have surged in recognition, providing aggressive costs and catering nicely to households, teams, and long-stay vacationers.

On the brighter facet, the higher-end segments of the lodge market have demonstrated a heightened capability to answer evolving tendencies, and subsequently efficiently managed to capitalize on the numerous pent-up demand for journey in 2022 and 2023, notably from the U.S. market, which returned to town with a vengeance. This resulted in a exceptional surge in common charges, whereas occupancy ranges rebounded to these seen in 2019.

Concerning lodge investments in Florence, entry limitations stay sturdy. Restricted provide and robust demand have lengthy made town a fascinating vacation spot for lodge traders and the latest enchancment in lodge efficiency additional enhances the attraction of the lodge asset class. There’s additionally a priority on the a part of native administrations relating to the chance of over-tourism within the metropolis heart, and the present orientation is to place a brake on the phenomenon of trip houses and the conversion of current buildings into resorts by proscribing the issuance of licenses within the historic heart. Whereas the result of the proposals at present below dialogue is unsure, it appears unavoidable that sooner or later, entry limitations will intensify. Provided that Florence is a world icon of tradition, structure, design and way of life, it’s foreseeable that the demand for lodging will persistently outstrip provide sooner or later, progressively propelling the lodge market in direction of the higher market segments.

About Lorenzo Gullotta

Lorenzo Gullotta is an HVS Milan and Athens places of work affiliate. He holds a level in Economics and Administration and an MSc in Enterprise Administration from Tor Vergata College of Rome. After a couple of years working in hospitality operations, he goes on to acquire an MBA in World Hospitality Administration from Les Roches College, in Switzerland, earlier than becoming a member of HVS as an analyst in October 2021. His actions embody market research, feasibility analyses and lodge valuations within the Mediterranean space. Contact him at +39 334 7735217 or lgullotta@hvs.com.