Boom Times Continue for Berlin Hotels

Maren Martell, DPA, January 3, 2012

The number of foreign and German tourists visiting Berlin continues to increase, leading to a growth in the number of investor-funded hotels going up across the city.

There are some concerns that it will be difficult to keep room occupancy rates up over the long term but, at the moment, the construction work continues apace -- with room availability to increase further when Germany's first Waldorf Astoria opens in the spring.

Situated near Zoologischer Garten and the Kurfuerstendamm boulevard, and with a view over the Gedaechtniskirche, the 118-metre-high hotel, designed by the renowned German architect Professor Christoph Maeckler, consists of 232 rooms and luxury suites.

The neighbouring Zoopalast cinema is getting a facelift, while the Bikini-Haus office building is also undergoing a 100-million-euro (130-million-dollar) renovation.

The addition of the Waldorf Astoria means that visitors to Berlin will, in future, have a choice of 24 luxury hotels -- a situation that many industry experts feel is an oversupply of rooms.

However, tourists continue to flock to Berlin, with the number of overnight stays set to break the 22-million mark, making the German capital now third behind London and Paris as Europe's most popular destination.

Berlin is particularly popular with younger tourists thanks to its wide range of clubs and alternative lifestyles, but is also gaining a reputation as a city for shopping trips.

The low price of hotel rooms compared to similar European destinations is an added attraction for tourists, although many Berlin hoteliers feel it's not possible for prices to drop any lower.

The average room occupancy rate lies at a healthy 71 per cent with no sign of a slowdown in the number of tourists visiting Berlin, but the downward pressure on room prices is being acutely felt by some.

According to figures from the German Hotels and Restaurants Association (DEHOGA), another 41 new hotels -- increasing Berlin's room capacity by a further 8,000 beds -- are set to be built from 2012 onwards, with 21 due for completion next year alone.

A 464-room four-star hotel and congress centre with views of the Reichstag and Chancellery is under construction by the Sheraton group at the Hauptbahnhof main railway station. The Steigenberg group is also investing 50 million euros on a mid-range 412-room hotel in the same area.

While the Waldorf Astoria will open in City West, another two five-star hotels will open in the Mitte district next year, increasing room capacity there by 300 and increasing competition for the Adlon, Hotel de Rome, Kempinski and Ritz Carlton hotels.

"There is no other city in Germany that is increasing hotel room capacity like Berlin," says DEHOGA chief operating officer Thomas Lengfelder.

Berlin's room capacity currently stands at approximately 125,000 beds, while, by comparison, New York's Manhattan has just 70,000 beds.

The driving force behind the ongoing boom are the comparatively low property prices, as well as Berlin's recent history of success in this area. "This is attracting investors from within Germany and abroad," says Lengfelder.

Over the past year alone, room prices in Berlin have dropped an average of seven per cent, from 82 to 76 euros, according to internet portal, compared to a decline of just one per cent across Germany as a whole.

This has led experts to warn of sinking profit margins, although DEHOGA point out that prices at five-star establishments have only dropped marginally over the same period. Five-star rooms cost around 144 euros, not including VAT and breakfast, while three- and four-star rooms have fallen by an average of one euro per night.

"That drop is painful enough when you take into account the number of rooms and remember the increase in energy and labour costs," says Lengfelder.