New researched has reported on the popularity of Stockholm as a tourism destination and highlighted that the demand is not currently being met by international hotel brands.
According to the report from Christie + Co, while the share of international visitors to Stockholm has increased in the last decade, the market is underrepresented by international hotel brands and dominated by domestic and regional operators and brands.
Nordic Choice Hotels and Scandic Hotels are currently the largest operators and less than one seventh of the city’s room stock is internationally branded, making Stockholm an attractive market for international operators and brands to expand into.
Authors of the report, Anna Eck and Marcus Josefsson found that the demand for trendy low-cost accommodation alternatives has also emerged recently as guests become more price sensitive and go after the trend for space-efficient, limited-service hotels.
Recently, Swedish hospitality company Ligula Hospitality Group introduced its own budget brand, Motel L, which has gone down well with guests.
Report author, Anna Eck, consultant at Christie & Co commented: “Whilst there is a lot of appetite from international hotel operators to penetrate the Stockholm market, this has not materialised yet, primarily due to differences in operating structure preferences from national, as well as, to a certain extent, Scandinavian investors. Leading Swedish property companies and local hotel operators seek lease structures while most international brands favour asset-light strategies such as franchise or management contracts. An alternative would be for a property owner to sign a lease contract with a third-party operator who, in turn, signs a franchise agreement with an international brand.”
“In terms of product, there are clear gaps in the international-branded full and limited-service sectors. Tourism is up and guests are eager to discover unique hotel concepts in their home market, which they may have already been exposed to abroad. However, domestic and regional players do not offer suitable products and concepts to respond to such expectations, and therefore add more mid-market supply.”
The Stockholm hotel market has grown substantially over the past decade. Combining the increase in supply and demand together with ARR growth of about 14% over the same period (on average 1.4% per annum), room revenue has gained a staggering 56% in the last decade or a total of about 5.6m kr in 2015 according to Christie & Co estimates.
Occupancy for the wider Stockholm area has hovered around the mid-sixties mark, reaching 65% in 2014 and market occupancy is expected to have settled around 70% for 2015.