Growing investor interest drives strong year for Europe hotel deals, HVS says

Hotel investment in Spain surpassed its 2015 record last year, mainly due to international investor acquisitions.
Photo credit: Marriott International

European hotel transaction volume reached €21.7 billion in 2017, an increase of 22 percent over 2016 and the second-largest figure ever recorded, according to the most recent European Hotel Transactions report from HVS.

Single-asset transactions in Europe were up 16 percent year-on-year to a volume of €12.4 billion, continuing an upward trend and accounting for 57 percent of transaction volume, with some 323 hotels (59,500 rooms) sold in 2017 for more than €7.5 million.

Portfolio volume grew 29 percent in activity to €9.3 billion, with Spain accounting for the majority of interest at 36 percent, with nearly 30,0000 rooms sold in the country in 2017 across 14 portfolios.

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This, the report claimed, reflects the growing investor interest for Southern Europe.

"A year of strong RevPAR growth across most of Europe was reflected in transaction levels, particularly in London, Amsterdam, Barcelona and Madrid," report co-author Peter Szabo, associate at HVS Hodges Ward Elliott, said in a statement. "Other secondary markets such as capital cities in the CEE and Southern European resorts also enjoyed increased investor interest as hotel performance saw big improvements."

Key Markets

The UK regained its leading role in transaction activity, with sales volumes accounting for 25 percent of the region's total and reaching a value of €5.4 billion, up from €3.6 billion in 2016. Single-asset sales reached values of €3 billion, while portfolio activity accounted for €2.4 billion, despite ongoing political uncertainties.

Spain had a record year for hotel transactions, accounting for 23 percent of total activity and doubling 2016 results with sales at €5 billion.

Transactions in Germany declined in 2017 after a record year in 2016, with portfolio sales down 38 percent to a value of €1.5 billion. However, single-asset sales grew, with Munich and Berlin proving particularly popular with investors.

London was once again the leading European hotel transaction market, with a total volume of around €2.5 billion, ahead of Amsterdam at €1.3 billion. Paris, however, fell to third place in the table, with €777 million-worth of transactions. Madrid and Barcelona recorded a combined transaction volume of €1.1 billion.

"Stability in both exchange rates and interest rates and the availability of hotel stock has helped Europe become popular among hotel investors, particularly private equity investors from North America," report co-author and HVS associate Magalí Castells said in a statement. "As we move into 2018, key factors that will influence the transaction market will be interest rates and staffing pressures. As stock becomes scarce in primary markets developers and investors will be increasingly looking at secondary markets such as Southern Europe or the CEE."