Hotel investment figures across Europe fell by 49.7% in Q1 2021 to €2.2bn (£1.9bn), according to the latest figures from Savills.
However, despite the depressed figures, the agent said there was a significant amount of capital that had been raised by private equity firms and was targeting the European hotels market.
The UK remains the most liquid of the European hotel markets, with €746.5m of assets traded in Q1 – this represents a 34.6% share of the market. Spain was the second most liquid market with €400m of deals transacted, pushing Germany into third place with €241.1m of sales.
Savills said that new prospective buyers were particularly keen on acquiring in markets with historically higher barriers to entry; typically prime gateway cities, with the notion that ‘bucket list’ tourist destinations will be among the top priorities for pent-up travel demand.
It said that while prime trophy assets continue to dominate investment volumes, it was sub-€10m deals that were driving the bulk of sales in terms of deal count. This was largely steered, said Savills, by private buyers seeking investment opportunities on assets boasting a relatively positive operational outlook, in key coastal and country staycation markets.
Richard Dawes, director in Savills’ EMEA hotels team, said: “The emphasis on prime assets is evidenced across key Q1 2021 deals. For example, the Zetter Group, comprising three prime London assets, was acquired by Orca Holdings in March, with the brand looking to expand further into key European gateway markets such as Paris, Madrid and Amsterdam.
“Prime yields for leased hotels in Paris (3.5%), Amsterdam, Berlin, London and Munich (all 3.75%) remain sharpest, in line with strong levels of investor demand driven by long-term fundamentals. The non-prime segment is likely to experience further outward yield pressure, driven more directly by tough micro market conditions, and assets’ ESG credentials and financial challenges.”
Josh Arnold, Savills research associate, added: “2021 will mark the early beginnings of recovery for many hotels, with the longer-term outlook remaining promising. The vaccine rollout in Europe suggests any current lockdowns will be the last, and that demand pick-up is imminent. As countries begin easing restrictions, we can expect the staycation market to benefit in the first instance, followed by recovery across short-haul international leisure destinations.”
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