Hotel transaction volume across Europe reached Û17.8 billion in 2016, down 25Êper cent downÊon the previous year’s record volume, according to the annual European Hotel Transactions report, published this week by HVS and its brokerage and investment services division HVS Hodges Ward Elliott.
While portfolio activity halved to Û7.2 billion-worth of sales, single asset transactions remained strong with volumes of Û10.6 billion, up almost 17 per centÊyear-on-year.
ÒLast year’s fall in portfolio hotel transactions came as no surprise, particularly as it followed an extremely active 2015 during which there were Û14.6 billion-worth of portfolio transactions,ÓÊsaid report co-author Friederike von Bnau, associate, HVS London. ÒMany investors sat tight last year as the world experienced a number of political and societal changes, although an appetite remained for single asset acquisitions.Ó
Germany’s hotels were the star performers during 2016 with transaction volumes reaching Û4.4 billion, including Û2.45 billion-worth of portfolio assets, a 30 per centÊrise on 2015. Single asset transactions in Germany valued Û1.95 billion with key deals being the sale of the Hyatt Regency Dusseldorf to Algonquin and Aviva France’s Primotel Europe fund and the sale of the Grand Hotel Taschenbergpalais Kempinski in Dresden.
Despite a 70 per centÊfall in transaction levels the UK was still the second best performer in Europe. Of its total volume of Û3.6 billion, Û2.1 billion were single asset transactions. Portfolio transactions fell 83 per centÊyear-on-year to Û1.5 billion (£1.2 billion).
London maintains its position as the leading European hotel transaction market, with a total volume of Û1.8 billon. The fact sterling lost 10 per centÊof its value between 2015-16 is thought to have affected acquisition decisions throughout the year, as well as weakening the UK’s year-end ranking.
Transaction volume in France increased in 2016, up from Û1.5 billion to Û1.9 billion. Single asset transactions showed a 130 per centÊgrowth year-on-year, although operating performance continues to struggle in Paris and Nice.
In Spain market fundamentals continued to strengthen last year with the country showing a 12 per centÊincrease in transaction activity to Û2.1 billion. Ireland and Austria also showed a rise in transaction activity in 2016.
The majority (83 per cent) of total investment volume was acquired by European players, totalling Û14.8 billion of acquisitions (up from last year’s 40 per cent). The market saw a large fall in North American, Middle Eastern, and Asian investors’ investments, by about 88 per cent, 70 per centÊand 61 per centÊrespectively, and, of the Û980 million of Asian inflow, almost 40 per centÊwas invested in London.
ÒThe new normal, in a period of political uncertainty, Brexit and low interest rates seems to be a race for fixed income hotel assets, as a variety of investors reach to hotels as an alternative in the search for yield,Ò concluded report co-author Peter Szabo, analyst, HVS London. ÒDespite the lack of stock, appetite for hotel assets will likely be strong in 2017 until interest rates turn and pricing levels adjust across the spectrum.Ó
