Four- and five-star hotels across Europe achieved a 3.9-percent boost in value last year, according to HVS’ 2018 European Hotel Valuation Index.
Paris, London, Geneva, Rome and Zürich recorded high hotel values per room in 2017. However, prices in euros dropped year-on-year in all of these cities, except for Paris. “Business and consumer confidence, as well as GDP growth in Europe, are all riding high,” Sophie Perret, director of HVS London, said in a statement. “Hotel demand is strong in the majority of European markets, with low levels of new supply in most cities pointing to robust performances across the board.”
Lisbon, which is considered one of Europe’s safest destinations, topped these cities in value growth for 2017 due to its rising guestroom demand. The Portuguese capital recorded a 14.7-percent increase from the previous year. Last year was also the city’s fourth consecutive year of double-digit growth. International investor, developer and lender interest also grew in Lisbon last year in response to rising traveler demand.
While St. Petersburg ranked second in value growth in the region, Moscow ranked fifth in Europe last year. Both St. Petersburg and Moscow hotels recorded strong gains as the rouble strengthened against the euro, allowing the cities’ hotel values to increase 14.4 percent and 11.5 percent respectively in euros. However, when measured in roubles, values in Moscow hotels saw a 1.1-percent drop and only jumped 1.5 percent in St Petersburg.
Madrid’s hotels followed behind St. Petersburg’s in third for value growth, rising 14.1 percent. The strong economic climate and increasing inbound tourist numbers also allowed occupancy and average rate to rise. In response, active investor interest and transaction volumes grew in Madrid.
UK hotels reported a small drop in value in euro terms due to value changes in the currency while hotels in Birmingham and Manchester saw a slight rise in sterling values. London’s hotels grew 4.3 percent in value with the help of a strong economy and the city’s ongoing popularity with leisure and business travelers. Hotels in Edinburgh saw similar value growth, which was up 6.3 percent. HVS predicts overheads, including rising labor costs, at UK hotels will continue to put pressure on operating margins over the next 12 months.
Istanbul’s market also saw a 3.4-percent drop in euro values, mainly caused by terrorist attacks, Turkey’s involvement in the civil war in Syria and its unstable relationship with Russia. However, the local currency value rose 18.7 percent.
“On balance, it’s likely that hotel investment will continue unabated in most cities, as strong underlying principles drive value growth, especially for those markets in Eastern and Southern Europe, which haven’t yet returned to pre-crisis value levels,” Simon Hultén, analyst at HVS London, said in a statement.