HVS: Europe's hotels report five years of value-growth

Europe’s hotels saw their fifth consecutive year of value-growth last year, with properties in the UK and Southern Europe seeing some of the biggest gains, according to the 2015 European Hotel Valuation Index, published this week by global hotel consultancy HVS.

“Hotels in several cities have experienced significant value increases, including Manchester and Birmingham, which have both seen double-digit growth following improved performance and growing investor interest,”  report co-author James Heavey, analyst, HVS London, said in a statement. 

The city with the biggest value climb was Madrid, with a 14 percent rise year-on-year. The average value (in euros) per hotel bedroom in the Spanish capital rose from €185,000 in 2013 to €211,000 in 2014 due to a slowdown in the city’s new hotel supply and renewed international demand for rooms, particularly in the corporate sector. 

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“As a result, potential investors are looking at Madrid, and beyond, to acquire cut-price assets ahead of the expected growth of the next few years,” added Heavey. Nearly two years ago, for example, Four Seasons announced plans to open a hotel in the Spanish capital, and just a year back, China’s wealthiest man, Wang Jianlin, acquired the Edificio Espana in Madrid for $358.6 million. (The building was reportedly purchased from Grupo Santander at a discount of 33 percent from the price that the Spanish banking giant had paid for the 25-story building in 2006.) 

The second-biggest value rise in hotel stock was in Manchester, up 13.5 percent year-on-year to €167,510 per room. The hike is partly attributable to the lack of new hotels in the city, a situation due to change as Manchester has a development pipeline of some 2,000 rooms opening by 2017.

Dublin hotels recorded the third-largest growth in the Valuation Index, with values rising 13 percent to €203,000 per room. As Ireland’s banks recover from recession, property prices overall have risen 25 percent in the past year.

This year’s Index noted that Europe’s most expensive hotel rooms are still in Paris (€703,935), London (€678,222) and Zurich (€534,646), considerably above the European average of €246,641.

“The trend for improving values should be sustained in the foreseeable future,” commented report co-author Sophie Perret, director, HVS London. “There is clearly a narrowing of the gap that has, for the last few years, separated primary markets from those cities that were previously considered ‘no-go’ areas for most investors. 

"While cities such as Paris and London will remain out of reach for most, hotels in German cities continue to offer reliable opportunities and Southern European markets are certainly a bright spot at the moment.” 

As Russia’s political turmoil continues it’s no surprise that the country’s two biggest cities saw the biggest value declines. In Moscow, hotel values fell nearly 38 percent, while those in St. Petersburg fell by 32 percent. Both cities have seen recent high-end hotel development, however: In 2013, InterContinental Hotels Group brought its boutique Indigo brand to Russia with the Hotel Indigo St. Petersburg – Tchaikovskogo. A few months later, the Four Seasons Hotel Lion Palace St. Petersburg became the brand's first property in the country, following a major renovation from the private apartment building known as the "House with Lions" into a five-star hotel.

By November, the Hotel Nikol'skaya Kempinski opened on Lubyanka Square in central Moscow. A six-year renovation project merged several adjacent historic buildings not far from Red Square, the Kremlin, and the Bolshoi Theatre. A little less than a year later, Four Seasons opened a property in Moscow on Manezhnaya Square.  

Sofia remains in the lowest position on the Index, with values per room averaging €99,902, Bratislava was ranked second from bottom (€104,161) and Tallinn (€109,273) third from bottom. [ends]

To download a copy of 2015 European Hotel Valuation Index, by James Heavey and Sophie Perret, click here.  

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