Economy hotels might be lowest on the chain scale, but it's top of mind for brands and investors in Europe.
Most recently, German real estate investment group Union Investment expanded its hotel portfolio in Munich by acquiring a Super 8 hotel (pictured above). That deal came on the heels of InterContinental Hotels Group's signed deal for 20 hotels in Europe, as the economy brands proliferate in the region.
Union Investment acquired the 197-room hotel from Munich Hotel Invest, part of the Lambert Group. The hotel will be leased by GS Star for 25 years.
The new Super 8 hotel in Munich marks the first time that Union Investment and hotel property operator GS Star have worked together. “With a hotel portfolio that will soon number 13 properties, we are an attractive partner for Union Investment,” said Michael Bungardt, CEO of GS Star.
"The Munich hotel market has performed exceptionally well in the past 10 years—and still has a lot of potential, with regard to both business users and leisure travelers," said Dr. Christoph Schumacher, a member of the management team at Union Investment Institutional Property GmbH. "Accordingly, we have now acquired a third hotel property in Munich within three years for our institutional fund UII Hotel Nr. 1. By investing in different brands in different locations, we can achieve a high level of diversification within what is an internationally sought-after city.”
Union Investment is the ninth-largest hotel investor worldwide. The investment manager has so far acquired nine properties for its UII Hotel Nr. 1 fund, focusing on budget and midscale hotels. In addition to eight German properties, the portfolio includes a hotel in Vienna. The company said that the target size for the fund was around EUR500 million and that it was interested in intensifying its relationship with GS Star as the company grows quickly.
GS Star currently manages five hotels in Munich, Vienna, Böblingen and Leipzig. In the next months the company plans to open four additional hotels in Munich, Göppingen and Freiburg. In addition to this, the opening of four hotels in Germany is planned for 2018.
Developed by GS Star, the Munich hotel is the second of 10 Super 8 hotels to be developed in the country as part of an agreement signed in 2012 with Wyndham Hotel Group. The next Super 8 hotels are due in Freiburg in 2017, in Mainz and two hotels in Hamburg in 2018. Rui Barros, Wyndham Hotel Group’s SVP and managing director for Europe, the Middle East and Africa said that the group saw “buoyant demand for more affordable hotel accommodation” in the region.
IHG's Economical Move
Meanwhile, IHG and Novum signed a 20-hotel deal across Europe in markets including Germany, Austria and Netherlands, across the operator’s portfolio of brands. The MDA is the first venture together between both companies and will see IHG build on its estate of over 650 hotels in Europe, including 64 hotels and Novum’s 99 hotels across Germany, including its own brand hotels. Those developed in partnership with IHG will be franchised.
Rob Shepherd, chief development officer, IHG, Europe, said: “Europe is growing at pace and we are well positioned to take advantage of the appetite for branded growth. We cannot wait to kick off the beginning of this long-term partnership with Novum Group.”
IHG and NOVUM Hotel Group sign landmark deal to develop 20 hotels across Europe https://t.co/ZbBkDRqXaE— archisapien (@archisapien) October 9, 2016
Commenting on the deal, Lukas Hochedlinger, managing director Germany, Austria & CEE, Christie & Co, said: “The economy market in Germany is growing year-on-year with more branded players entering the market. The rise of franchising is putting pressure on the leased model so favored in the country and may lead to structural change. In parallel we see more “white label” operators emerging, satisfying the demand for the still-beloved leases.”
The Expo Real in Munich gave a number of operators the chance to showcase their expansion plans, with Germany-based Motel One announcing plans to open eight new properties with approximately 3,300 rooms over the course of next year. With the already contractually-secured projects, the group is looking at growth from 54 hotels with approximately 14, 500 rooms to a total of 81 hotels with approximately 23 000 rooms.
This year saw the company enter Switzerland, with the opening of Motel One Basel. A second Motel One is due to open in Zurich in 2017. Next year will also see the opening of the first Motel One in Spain: the Motel One Barcelona-Ciutadella and the first in France, in Paris at the end of the year.
At Whitbread, the company announced in July that it was focusing Premier Inn’s international strategy on continuing to grow its businesses in Germany, which it described as “structurally attractive” and in the Middle East, where it operates a joint venture, pulling out of India and South East Asia.
The company has used its balance sheet to drive expansion in Germany, acquiring two sites in May which has given it an estate of four Premier Inn sites and 760 bedrooms in the country as it targets six to eight hotels open and trading by 2020.
In a note to clients, HSBC said that it felt, while Premier Inn had “plenty of runway for market share gains from independent hoteliers” in the UK, it also believed that Germany presented a major opportunity and was capable of taking over as the growth engine for Premier Inn in the long term.
According to the Global Business Travel Association Business, travel spending in Western Europe is expected to see growth of more than 6 percent this year and next. Germany, which represents 20 percent of the region’s business travel, will enjoy a 9.5-percent increase in 2016.
According to STR Global, while the upscale segment leads the pipeline overall, economy rooms comprise only 5.6 percent of all supply but 19 percent of rooms under construction. The German pipeline is building strongly. Figures from Tophotelprojects suggest the German market has seen 120 new hotels open in 2015, and 193 are scheduled to open in 2016, adding 23,300 rooms to the market.
PwC commented: “Currently, the German market sees a clear trend towards larger branded hotels being built, while smaller independents slip out of the market. With Germany representing around 20 percent of Western Europe’s business travel activity, and with this figure forecast to grow further in 2016, it’s no wonder Germany is becoming one of Europe’s most attractive investment markets.
“Combine this with growing interest in the self-select /limited-service segment and it’s clear why international groups are developing there.”
Super 8, Premier Inn and Motel One are joined in Germany by EasyHotel, the super-budget brand, which has ambitions to become "a leader in the super-budget market in Europe and the Middle East." With a recent share placing raising GBP37 million, investors clearly agree.