International developers cast eyes on Europe

IHIF is wrapping up in Berlin (be sure to check out our coverage from the first and second days of the forum), so the eyes of the hotel industry are on Europe. The last week has seen plenty of notable transactions and reports from the continent. Here's the latest buzz from research groups and from large-scale brands looking to expand or gain a foothold...

According to the annual European Hotel Transactions report, published last week by HVS and its brokerage and investment services division HVS Hodges Ward Elliott, hotel real estate was the standout performer in Europe's property market in 2014, with transaction volumes growing faster than other asset classes, such as office, industrial or retail space. Last year saw European hotel transaction volumes rise to a total of €4.4 billion, up 86 percent on 2013—a new record since the onset of the global financial crisis.

This is a significant development: As IMR's Bruce Serlen recently noted, many of Europe’s economies have been shaky over the past few years and barriers to entry remain high in many markets. But several companies still see potential, especially at the economy and broad mid-market price points. For example, Starwood Capital Group and Jin Jiang International Holdings completed the sale of Groupe du Louvre and its indirect subsidiary Louvre Hotels Group to Shanghai Jin Jiang International Hotels Development of Luxembourg, for €1.3 billion. Louvre Hotels Group is the second-largest hotel group in Europe, with a network of more than 1,100 hotels (more than 90,000 rooms) in more than 40 countries worldwide. Shanghai Jin Jiang International Hotels Development, of which Jin Jiang International Holdings is the single largest shareholder, owns and operates 1,215 economy and mid-scale hotels (over 140,000 rooms) in Asia.

This is part of an overall trend in Asian hotel real estate acquisitions in Europe: These deals surged by 90 percent year-over-year in 2014 and by 20 percent globally, according to a CBRE report. With limited investable stock available in domestic markets, CBRE forecasts that hotel acquisitions by Asian investors could rise by as much as 58 percent in Europe this year.

Starwood Hotels & Resorts announced at IHIF that it plans to open more than 40 new hotels and resorts across Europe in the next five years, expanding its portfolio by almost 30 percent, with openings in both fast-growing and established markets. 

The UK, of course, is seeing solid numbers in both major hubs and in smaller cities. As an example of the latter, the DoubleTree by Hilton Hotel and Spa Chester was acquired for an undisclosed sum by investment vehicles affiliated with MCAP Global Finance in a deal brokered by the specialist hotels team of real estate advisors Colliers International. The acquisition followed the purchaser’s acquisition of 11 Queens Moat Houses hotels branded as Crowne Plaza and Holiday Inn in 2014. 

Meanwhile, the five-star J.W. Marriott Grosvenor House Hotel, in London's Park Lane, Mayfair, was put up for sale for £500 million after the property's owner, Sahara Grosvenor House Hospitality, failed to pay debts on it. Property agent JLL, appointed by administrator Deloitte, will market the 494-bed property to investors worldwide. 

But it's not all smooth sailing for the English capital: A €2-billion offer by The Abu Dhabi Investment Authority (which is chaired by the emirate’s ruler, Sheikh Khalifa bin Zayed Al Nahyan) for a group of London hotels cannot go ahead without the permission of Irish property developer Paddy McKillen. The offer for Claridge’s, the Berkeley and the Connaught hotel is the latest bid by Middle Eastern states to buy prime properties in London over the past year, though it puts a higher valuation on the hotels than any former offers.