Europe's hotel transaction volumes fall 14%

The Qatar Investment Authority acquired the Grosvenor House Hotel in London last year. Photo credit: Marriott International

European hotel transaction volumes reached €18.6 billion in 2018, a decrease of 14 percent on the previous year, but still the fifth highest level recorded, according to the annual "European Hotel Transactions" report published this week by HVS and its brokerage and investment services division HVS Hodges Ward Elliott.

A total of 655 properties, averaging 156 rooms, changed hands in 2018 with the average price per key growing 8 percent, reflecting both the quality of the hotels that were sold and a growth in values.

“The European hotel investment market continues to show rising popularity as an alternative asset class due to its strong yields. While 2018 may have seen an overall decrease in transactions, it was compared to an exceptional 2017,” report co-author Nicolas Auer, analyst with HVS Hodges Ward Elliott, said in a statement. “Continued [revenue per available room] growth across most of Europe helped support transaction levels in 2018 and despite the uncertainty surrounding Brexit, interest from overseas investors in U.K. hotels has remained very strong, demonstrating confidence in the future of the U.K. hotel market.”

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The year saw single-asset transaction volumes fall 23 percent on 2017 levels to a new value of €9.5 billion, representing 51 percent of the total transaction volume. Sales included 271 individual hotels amounting to over 45,000 rooms. Portfolio activity decreased on the previous year by just 3 percent to €9 billion, 49 percent of the total volume, with 58 transactions comprising over 380 hotels and over 56,000 rooms.

Reduced activity from Asian and European buyers was the main reason for the decrease, with high-net-worth individuals in particular, decreasing their investment in hotels in 2018 to €116 million, compared to €554 million in 2017. Real estate investment trusts demonstrated an increased appetite for hotels, up 9 percent in 2018 to a total buyer volume of some €1.7 billion in 2018, compared with less than €1.6 billion in 2017, while private equity firms provided the largest amount of capital by buyer type in 2018 at a value of €3.9 billion.

The U.K. confirmed its leading role within Europe, reaching transaction volumes of €6.2 billion in 2018, up 14 percent on the previous year’s €5.5 billion. Germany also recorded a strong year, with total investment volume of over €3.8 billion, surpassing last year’s volume by 2 percent thanks to a significant increase in single-asset activity, which rose 16 percent to €2.6 billion.

London remains the leading European hotel transaction market with a total volume of around €2.1 billion, with Dublin ranking second totaling €610 million and Amsterdam third with €560 million. Dublin saw the largest volume increase, with transactions rising an impressive 215 percent, or €416 million over 2017.

“Interest rates, staffing pressures and the U.K.’s departure from the [European Union] will all influence the transactions market in 2019,” said Alexandre Rey, analyst with HVS Hodges Ward Elliott and co-author of the report. “The hotel investment market in the U.K. will most certainly face a slower year, but the rest of Europe might benefit from this slowdown as investors will seek to deploy capital elsewhere.”