As many as four in 10 investors have outlined plans to buy more hotels in Europe, according to the latest research from Cushman & Wakefield.
The survey, which polled 50 investors that have spent more than €26bn on hotels in Europe over the past five years, found that 40% of firms intend to buy more hotels across Europe.
This compares with a 21% minority stating they will buy fewer hotels. A further 10% have put their investment plans on hold.
A 59% majority of investors would consider opportunities with a moderate discount of 15% or less, which C&W said was “relative” to 2019 levels. Meanwhile 12% of investors sought more distressed opportunities, with a price reduction of at least 25%.
Leisure destinations to recover faster
Geographically, the UK remained the most appealing European region for investment. This was followed by Germany, the Iberian peninsula, France and Benelux.
Barcelona was the most attractive city for investment. London, Paris, Amsterdam and Munich rounded out the top five rankings.
C&W said Barcelona in particular benefits from strong leisure demand. There is also a moratorium on hotel development at present, contributing to its top spot in the rankings.
Broken down by market type, leisure destinations such as Barcelona are expected to recover faster, with 85% of respondents anticipating performance to fully return to 2019 Revpar levels by 2023.
Regional cities are expected to follow, with 77% predicting recovery between 2023 and 2024.
Major cities that depend more on international travel are expected to recover at a slower pace. Three quarters of investors expect recovery between 2023 and 2024 in these markets, with a further 21% expecting this in 2025.
The report noted that this was an optimistic view compared with the recovery after the global financial crisis, when it took 5.6 years on average for hotel Revpar in major European cities to recover to pre-crisis levels.
Resorts gain appeal
In terms of categories, resorts were found to be the most popular type among investors. A 70% majority said they were more appealing now than they were before the pandemic, likely driven by expectations for faster recovery and the long-term growth prospects of leisure travel.
Additionally, serviced apartments have become a more attractive asset type for 60% of investors. C&W cited their resilience during the pandemic, high-profitability and low-cost base and their flexibility to shift to the medium and long-term rental sectors.
However, investors have lost appetite for hotels centred around hosting meetings, incentives, conferences and events, and those located at airports. This has been driven by pandemic-led changes to working patterns, as well as ongoing wariness around large-scale events in the near-term.
Despite this, 21% said their interest in acquiring those types of hotels has not changed as a result of the pandemic.
Investor sentiment grows
Rob Seabrook, head of hotel transactions for EMEA at Cushman & Wakefield, said: “While there is still some gap between seller and buyer expectations, a significant amount of capital has been raised for hotel investment, and this will need to be deployed sooner rather than later to deliver returns.
“On the owner side, while leisure travel is recovering, government support for the hospitality sector is fading away, with moratoriums being lifted. Therefore, inevitably banks and landlords will soon expect tenants to repay deferred loan payments and owed rent.
“This might put pressure on some owners, but the trends highlighted in this survey are reassuring and should narrow the gap between seller and buyer expectations, helping to kickstart transaction activity.”
Bořivoj Vokřínek, head of hospitality research EMEA at Cushman & Wakefield, said: “The successful Covid-19 vaccination rollout, paired with rising consumer confidence, has revived the demand to resume foreign holidays, therefore boosting investor sentiment.
“The eagerness to acquire more hotel real estate heavily suggests that investors are looking beyond the immediate impact of Covid-19 on the sector to a point when travel limitations are lifted and the hospitality, leisure and tourism industries can fully reopen, recognising that they will prove a strong hedge against inflation.”
See also: Investors check in for £1.7bn hotel sell-off
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