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Plugging the Hotel Shortage Gap in the Nordics - Part 1: Concept Differentiation

Tourism continues to flourish in the Nordics with airport passenger arrivals, total visitor numbers and the total number of overnight stays all continuing to grow year on year. This growth is not simply a result of domestic demand but also significant increases in demand from overseas travelers. This is both from established markets such as Germany, The U.K. and neighboring Nordic countries, as well as developing source markets, with Asian demand playing an increasingly significant role.

Whilst this increase in demand has been met, in part, by the delivery of new hotel supply into the market over the past few years, average room rates continue to rise whilst at the same time hotels located within the major Nordic cities have all witnessed relatively stable average occupancy levels, meaning that there is further room for growth in the supply pipeline.

Little differentiation is the main gap

More importantly, however, there continues to be a miss-match between the nature of demand and the availability of an appropriate product. Indeed, the Nordic markets have traditionally been dominated by midscale, mid-market 3 and 4-star hotels, with very little differentiation of product offered to guests. It is precisely this deficiency in the market that is the real ‘gap’ that needs to be addressed if the Nordic hotel markets are going to be able to make the transition into being regarded as a truly global tourist destination and compete with their European counterparts.

Making a hassle-free stay

Catering to the modern-day traveler is all about making their stay hassle-free. This means providing guest services ‘on-demand’ via the availability of modern technology. They want free high-speed internet throughout the hotel, a powerful hot shower and a peaceful night’s sleep – meaning a high-quality comfortable bed and a room that is well insulated from unwanted outside noise. This has led to a blurring of traditional thinking behind hotel ‘quality’ and how guests define modern-day ‘luxury’.

Star ratings no longer apply so readily to a number of recent brands launched across mainland Europe, with factors such as appeal of the common areas, reduced waiting times at reception (self-check-in) and the quality of F&B and hotel ‘experience’ on offer far outweighing the outdated ideas of luxury such as large room sizes, wet leisure, room-service, valet parking, turn-down service etc.

Design-led hotels

The recent wave of design-led hotels, being labelled ‘affordable luxury’ by many, is offering the modern- day traveler what they really want by removing a lot of the frills that have become surplus to requirement for today’s tourist. Experience-based travel is about dropping-off your suitcase on arrival and getting out of the hotel to explore the city and surroundings rather than wasting time inside your hotel room. Operators are therefore creating fresh brands that offer smaller room sizes and reduced leisure facilities whilst placing greater emphasis on creating inviting, open spaces in which to work and interact with other guests, with specific attention given to the Hotel’s public areas and ultimately delivering what really matters in hospitality – the guest experience.

Examples of some of these design-led brands being rolled-out by established international players are Canopy (Hilton) Yotel, Indigo (IHG), Moxy (Marriott), Aloft (Starwood) citizenM, Mama Shelter and Centric (Hyatt) although there are also a number of popular independent operators establishing creative and intelligently designed hotels such as The Hoxton and Zoku, which are also starting to roll out their brands internationally. The Nordic hotel markets would all benefit immensely from these design-led ‘lifestyle’ brands being introduced locally.

New types of hotel concepts

Whilst it is true that the Nordic hotel markets are guilty of having been somewhat one-dimensional in terms of product offer over the years and have subsequently been slow to catch-up in more recent times, there are sporadic examples of new types of hotel concepts that are slowly being introduced. This has primarily been seen in Copenhagen thanks to some international operators taking their first steps into the Nordics by rolling-out their latest lifestyle brands, including Moxy, citizenM, and Generator. We have also seen a shift in offer in Stockholm, with the likes of Hobo and At Six opening in Stockholm last year in addition to the likes of Hotel With Urban Deli and Generator Hostel.

More still needs to be done, however, if the Nordic markets are going to grow to accommodate a wider variety of hotel concepts going forwards. There remains a significant gap in the market and many of the international brands mentioned in this article are still waiting to open their doors in the Nordics, despite having mandates to roll out their concepts here.

Top 4 barriers for international hotel operators to entry

What then, are the main barriers to entry being faced by such international hotel operators? Some of the more pertinent factors are highlighted below:

  1. Finding appropriate sites – Central city locations are rarely available.
  2. Brand standards - Whilst ‘brownfield’ sites can provide potential opportunities, these often require conversion of former office or warehouse buildings that make it difficult to conform to brand standards.
  3. Brand awareness & local market knowledge – Local hotel owners/developers are cautious towards the ‘unknown’ and therefore tend to lean towards recognized established regional operators (Scandic / Nordic Choice et al.) as this is what they know and trust.
  4. Operating structure – The Nordics is dominated by the long-term operating structure, be it either a fixed- or variable-rent arrangement. New entrants to the market are not always as willing to commit to long leases - with an associated minimum guaranteed rent levels and/or parent company guarantees viewed as a heightened risk when compared to securing access to these markets via a franchise or management agreement (HMA) operating set-up.

My summary

In summary, although we are gradually seeing that the Nordic markets are evolving to allow for greater differentiation of hotel concepts and product, at CBRE Hotels we strongly believe that more still needs to be done in this space going forward. Bringing greater brand diversity to the Nordic markets will allow for healthier competition and more international representation will only serve to lift these markets in their entirety, providing a further uptick in tourism growth to the benefit of all.


Please also read: CBRE has one of the largest hotels teams in the world. (

CBRE Hotels have a dedicated team in the Nordics and are in regular dialogue with a diverse range of international hotel operators seeking to establish their brands within the major Nordic hotel markets.

Please do not hesitate to get in touch with me directly if you’re a hotel owner interested in the budget and/or long-stay segments, if you already have a well-located site for hotel development in any of the major Nordic cities or even if you are simply looking to invest in hotels in the Nordics and wish to discuss appropriate strategy.

Phil Rist

Phil Rist

Phil has left CBRE. Please contact Daniel Holmkvist with any questions you may have. Mail: Phil worked as our Head of Hotel Valuations, Consultancy, and Strategic Advisory Team.

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