Research by Jones Lang LaSalle Hotels has revealed that a combination of three major factors is driving a significant increase in the number of new hotels under development in Europe.

“The constant desire of hotel operating chains to increase market penetration, an expanding pool of capital seeking a more diversified property investment portfolio and the lack of available (or suitable) product, has led to a marked increase in new development across many European markets, the extent of which has surprised us,” said Mark Wynne Smith, managing director of Jones Lang LaSalle Hotels.

“What concerns us is the level of new supply in certain markets where whole market occupancies are below 65 per cent.”

The company warns of a long, flat trading period to come for a number of gateway European cities, after an unusually severe drop in demand due to the international environment prevailing since 11 September 2001.

The research showed Madrid is suffering from too little demand and Barcelona is also expecting major supply increases. Brussels is already suffering from weak market fundamentals coupled with significant new supply; this is compounded by the ongoing plight of Sabena Airlines, which has resulted in a severe drop in airport arrivals.

Dusseldorf and Frankfurt are predicted to be going to suffer from considerable new supply levels over the next few years. Both are heavily dependent on weekday business travellers and trade-fair attendees, with a significant proportion of domestic visitors.

New supply has also been affecting trading in both Budapest and Warsaw, particularly as neither has a strong leisure market.

However, in Berlin, a weighty increase in supply in the 4- and 5-star sector is expected in the short to medium term, but the city’s supply situation in 2003-5 is predicted to be much healthier than it was in 1991-93. Although the city is struggling, trading should not suffer as in other German cities because of its capital city status and growing leisure market.

In the UK and London, Jones Lang LaSalle also sees the pattern as a fairly positive one, with minimal increases in supply in the medium term balanced by a healthy mix of weekday and weekend demand. Details: www.joneslanglasalle.com