European hotels set up for rosy 2014

(hotel exterior)

The hotel industry across Europe is set up nicely for a healthy year. So says hotel consultancy HVS London, citing an uptick in demand from both leisure and corporate guests, transaction activity set to improve and lending becoming more easily available. HVS was similarly bullish back in November.

Across Europe hotel development remains active with 360 hotel projects ongoing, an additional 60,000 rooms. Many are expected to open in 2014, with the balance in 2015 and 2016. A further 450 hotels (70,000 rooms) are currently at the planning stages, with the majority of projects to be found in the UK followed by Russia, Turkey, Germany and France, HVS said.

HVS said that some 45 percent of the new rooms under construction in Europe are in the upscale sector, rather than only the budget sectors. The luxury sector has now swung back to full health.

“There has been much talk about the growth of the budget end of the market, but operators are still keen to build prestigious hotels in key locations as consumer demand from Russia, China and the Middle East remains strong,” said HVS chairman Russell Kett.

London boasts around 100 hotel projects currently at the planning stage, while there is still demand for individual properties in the capital, as well as in the provinces.

“Debt financing is becoming easier, but typically this is still only for acquisitions and refinancing where the borrower is already known to the bank, rather than new development. Lending is more easily obtained for hotels in major cities as opposed to provincial or resort locations,” Kett said.

However, while hotel development and transactions look relatively positive, Kett urged operators across Europe, particularly those in upscale hotels, to adapt to the changing demands of the modern traveler who is now seeking a different sort of hotel experience, with genuinely courteous service, rather than bland, corporate responses.

“How much more refreshing it is when such attitudes come naturally to people, when staff delight in giving great service in a natural, unforced way, and when guests feel so happy about their experience that they do your marketing for you by telling their friends – little wonder that many boutique hoteliers recruit staff on the basis of their character and personality, rather than qualifications,” he said.

London has taken the lead in the development of alternative hotels, such as boutique properties and serviced apartments. These developments are meeting the needs of this more sophisticated demand base and ultimately this might stretch more into the UK regions.

“Boutique hotels have a great future ahead of them, not least in helping to re-educate the mainstream hotel sector in what the hotel business is all about,” concluded Russell Kett.

Meanwhile, according to Deloitte, hotels are back in good grace with investors. This according to research showing that hotel deals in the UK in 2013 were at their highest in six years.

As reported by City AM, UK hotel transactions totaled around £800m in the second half of 2013, up 66 percent on the same period last year and taking deals for the year to £3bn.

London accounted for 66 percent of all transactions.

Deloitte’s head of hospitality, Nick van Marken, said: “The spotlight has returned to hotels as an investment class, underpinned by a clear market recovery and improved macro-economics.”

The first six months of the year were dominated by portfolio deals, such as the sale of the hotel chain Principal Hayley to U.S. investment firm Starwood Capital. The second half was led by the sale of single assets such as the 12 Menzies hotels, which were snapped up by property firm Topland.

“Sovereign wealth funds, specialised investment groups and private equity will remain the dominant buyers in 2014, and we expect the continued influx of foreign capital,” Van Marken added.