As we noted last week, AXA Investment Managers-Real Assets and Danish pension fund ATP formed a 50/50 joint venture to buy the Nhow Amsterdam, slated to open in 2019. The pair described the city as one of Europe's “fastest-growing and most dynamic”—but efforts by local legislators to limit the number of hotels in the city are driving rates up and investors out of town in search of yield.
In 2015, the number of overnight stays at hotels in Amsterdam for both business and leisure visitors grew 2.9 percent over 2014’s numbers to 12.9 million. And last year, according to PwC’s European cities hotels forecast for 2017 and 2018, Amsterdam saw a 2.1-percent rise in revenue per available room, with the company forecasting a 2.2-percent increase this year. Occupancy is expected to increase three percentage points to 78.9 percent, with rate climbing from €137.5 to a predicted €139.4.
These numbers are good for the city, but locals are not pleased with the influx of visitors in city centers. Much like Barcelona, the local government has implemented a policy that limits development in the city center, sparked by local complains of neighborhoods overrun by tourists.
“This means that it will be very difficult to develop new hotels in Amsterdam’s center,“ PwC said in its recent European forecast. “The policy is expected to have a long-term effect on the lodging market in Amsterdam, in the sense that prices may rise and the legislation might stimulate the supply of alternative accommodation.”
The city’s tourist board reported that there were 650 hotels in the Amsterdam Metropolitan Area, up by 2.5 percent over 2014 and up 30 percent over 2008.
Beyond preventing development of traditional hotels, local residents are also looking to block the rise of Airbnb in city centers. In 2015, the city was one of the first to have Airbnb sign a deal to collect local taxes from hosts. Since then, the site has agreed to enforce the limit on the total number of days guests can stay in an Airbnb rental—currently 60 days per year.
“It’s made no difference,“ Marieke Dessauvagie, consultant at Colliers International, said about the limit. “People are able to create a new account as it monitors accounts, not addresses.”
“Next week, we have a powwow with the politicians over Airbnb because it’s getting out of hand,“ Dirk Bakker, partner and head of EMEA Hotels at Colliers International, added. “From 7 a.m. in the morning to 10 p.m. at night all you can hear is the noise of wheeled suitcases—that was one of the reasons why the hotel stop was put in place. But I don’t think anyone staying at the Ritz is going to pull their own suitcases. This is all Airbnb, all the groups of drunken, dope-smoking tourists who come for three days and cram themselves into an apartment.
“My feeling is that within two to three years, there will be a new hotel policy, because you are creating a problem for the economy. There will be nowhere for the conference attendees to stay. The good news has been for cities outside Amsterdam—The Hague, Rotterdam, Utrecht, which have been attracting international investment and where yields have been getting better and better.”
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.