Opening day at IHIF marked by solid numbers, earnest optimism

 

BERLIN, Germany--How 2014 concluded, is exactly how the hotel industry is hoping 2015 will be end up. Such is the merry mood pervading the International Hotel Investment Forum here at the InterContinental Berlin, where some 2,000 hospitality and tourism professionals representing more than 70 countries will convene for the next three days.

Marriott International CEO Arne Sorenson undoubtedly set the tone best for IHIF, exclusively exclaiming to Hotel Management his current state of exuberance. "2014 was one of the best years of all time; a year that I'd love to bottle and sort of open on New Year's morning every year and simply repeat," he said, adding he suspects that the economic conditions that carried 2014 will carry through 2015. 

Sorenson was one of a mix of on-camera interviews Hotel Management conducted on the opening day, with such executives as Philippe Bijaoui, VP of development, Europe for IHG; Elizabeth Winkle, managing director for STR Global; and Puneet Chhatwal, CEO of Steigenberger Hotel Group.

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GOOD NEWS TO START 

Panelists during IHIF's opening general sessions were equally optimistic and high-spirited. STR's Winkle opened the "Bird's Eye View" session by calling the current state of the hotel industry, "hot," evidenced by the flurry of plus signs fronting RevPAR numbers. She said that RevPAR in Europe is up some 5 percent YOY, and that it's the first time in six years that RevPAR contribution is being fed equally from occupancy and rate. January 2015, she added, was the strongest in terms of RevPAR growth change in six years in Europe.

 

"Demand continues to outpace supply, which is still growing at a level lower than the long-term average," Winkle said, adding that the top pipeline countries currently are in the UK, Russia and Germany, though some of the projects slated for Russia have the potential to not go off.

Meanwhile, Roy March, CEO of Eastdil Secured, said that from a cost of capital perspective, now is a time of great opportunity. "There is so much liquidity in the system right now," he said, noting the increase in Asian capital deployment and the benefits that have come as a result of global quantitative easing policies.

"The equity markets are getting frothy," he said, "chasing yield. Hotels are a great asset class."

March said that capital is flowing to European markets, in particular the UK, Spain and France. "There is heightened overseas interest from U.S. private equity as opportunities domestically diminish," he said. "The low cost of capital with growth portends very well for 2015 and beyond."

Chris Day, managing director of Christie + Co., touched on a slew of recent European transactions and explained that improved economic conditions are helping sales and valuations. "It's an extraordinary year for hotel investment across the globe. Global funds are active and opportunity driven."

Day went on to say that pressure is on for global investors to place capital and noted that European yields are still attractive.

Where is hotel investment headed? he asked. "There is no sign that transactional activity will lessen over 2015," he said. 

GLOBAL INVESTMENT
A trio of global investors touched on the transactions markets in the Middle East and Asia Pacific. Chris Knable, COO of Katara Hospitality, said he looks for assets that are great structures, have great stories and upside, and where they can inject some CapEx. 

Derek Cheung, CEO of China-based New Century Asset Management, said his company looks for high cash-flow and mature operations. "We are yield driven and want to be in Europe, where we can get bigger yield than in Asia," he said.

Both Knable and Michael Goodson, head of hospitality for Abu Dhabi Investment Authority, said they were long-term real estate holders. "We are global investors, value investors, Goodson said. "Our desire is to be in gateway markets. We look at sustained value on a deal and hold for long term."

"Selling is not really in our vocab," Knable said.

He added that it is more challenging to find an obvious clear buy today than over a couple years ago, though noting that a lot of money is flowing into Europe. "There is more capital and financing available, which makes it harder to find opportunities," Knable said. "As a long-term investor, we look for assets that can go over cycles."  

Goodson ended the panel on a humorous note. "Leverage doesn’t change value of anything," he said, "it just changes the price you can pay."

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