A new report from global hotel consultancy HVS highlights the fact that demand from the US, Far East and the Middle East for luxury accommodation is expected to grow, coupled with gradual improvements in the Italian economy. This, along with new and refurbished supply in the city's luxury segment, will serve to encourage further investment activity and ultimately boost achieved room rates.
Average rates amongst Rome's luxury hotels lag significantly behind those of hotels in Paris and London. Room rates in Rome's luxury hotel sector average around €400, while those in London average over €700, and in Paris close to €1,000. Occupancy in Rome's luxury sector at 74%, however, isn't far behind Paris and London's 77%.
One of the reasons for Rome's lower rates is that while the city attracts a similar guest profile to other European cities, it is less of a global business hub so guests are almost entirely leisure focussed.
Furthermore, Rome still somewhat lacks the hotels in impressive heritage buildings of Paris and the international luxury brands that London now boasts. Neither does the city have the quality and number of high-end suites which impacts average room rates.
Said report co-author Christof Bertschi, senior associate, HVS: "The area of Rome that houses many of the existing luxury hotels is no longer a prime luxury area as the focus of high-end travellers has shifted. Many hotels in Rome suffer from underinvestment because capital expenditure has been deferred for too long which means that the city's luxury sector fails to attract the high-spending guests that Paris and London receive."
However, new investment in the luxury hotel sector could bring the city more in line with other markets. Foreign investment, particularly from the Middle East, has dominated luxury hotel purchases in the recent years as well as the purchase of The Hotel Eden by the Brunei Investment Agency (owner of the Dorchester Collection) for a reported ?105 million, following which the hotel is set to undergo significant renovations.
The recently sold St. Regis, InterContinental De La Ville, Boscolo Aleph and Boscolo Palace hotels are likely to be upgraded over the coming years while the Baglioni Hotel Regina will set a new precedent for luxury suites in Rome following its acquisition by Qatari-owned investment vehicle Mayola for Investments.
"With the Italian economy expected to improve and growing demand from the US, the Far East and the Middle East, the city is well positioned for futher growth," added report co-author Sophie Perret, director, HVS London.
"Investors from all backgrounds will remain keen on acquiring hotel real estate in Rome while hotel operators will continue to scout opportunities. Overall, the potential to drive returns for investors is good, as bottom-line returns are decent with gross operating profit margins for luxury hotels typically ranging from 25-35%.
"Over the next few years we would expect to see a significant rise in the achieved room rates of Rome's hotel sector as hotel properties align themselves with luxury standards across the globe."