Over a third of real estate investors intend to buy more hotels across Europe, according to the latest research from real estate advisory firm Cushman & Wakefield. Despite the disruption to the travel and tourism sector from the pandemic, only 21% of investors intend to dial down their hotel acquisition activity and a mere 10% have put plans on hold.
The results are published today as part of a survey of more than 50 senior representatives of major private equity firms, funds, REITs and other institutional investors active in the European hotel real estate market. The respondents’ firms invested in aggregate over EUR 26 billion over the last five years (2016-2020), acquiring 664 hotels with 127,642 rooms, and accounting for approximately a quarter of all hotel transaction volume in Europe.
Travelling for work or leisure?
Resorts are the most popular type of hotel amongst investors. Despite the complexity of their operation and seasonality, the majority of survey respondents (70%) consider them now to be more attractive than before the pandemic. This is likely to be driven by the expected faster recovery and long-term growth prospects of leisure travel.
Serviced apartments have also become a more attractive asset type for investors (according to 60% of respondents), undoubtedly due to their resilience during the pandemic, high-profitability and low-cost base and their flexibility to shift to the medium and long-term rental sectors.
On the other hand, hotels centred around hosting meetings, incentives, conferences and events (MICE hotels), and those located at airports, have unsurprisingly reduced in appeal for most investors, given the deeper impact of Covid-19; namely the changes to working patterns and the inability and nervousness to host largescale events in the near-term [see figure 1 below].
Location, Location, Location
When asked about geographical locations, the United Kingdom & Ireland is the top target region for investors, followed by Germany, the Iberian Peninsula, France and Benelux. At a city level, Barcelona achieved the highest interest ranking among hotel investors, followed by London, Paris, Amsterdam and Munich, all dominating the top five [see figures 2 & 3 below for the full ranking].
They are all core markets and viewed as a safe investment, paired with the strong domestic demand for these locations and the relative strength of the German and UK economies. Barcelona specifically is a major European market and benefits from strong leisure demand. There is also a moratorium on hotel development at present, all of which contributes to its top spot in the ranking.