HVS' annual European Hotel Transactions report has found that European hotel transaction volume totaled €23.7 billion in 2015, a record level and an increase of 66 percent over 2014.
An "extremely active portfolio transactions market" drove the region to outperform even pre-downturn levels, the report said. Investors from Europe accounted for €10.9 billion worth of transactions, while activity from the Middle East rose 140 percent to €4.4 billion, and North American activity up 46 percent to €5.5 billion.
"Investors were attracted by continued RevPAR growth in hotels across most major European markets while the opportunity to achieve higher investment yields than other property types kept hotels an attractive investment class," report co-author Dayk Balyozyan said in a statement.
Of the €23.7 billion spent on hotels, portfolio volume accounted for €14.6 billion, more than double that of 2014, while single-asset volume reached €9.1 billion, a 21 percent hike on the previous year.
In terms of room numbers, an estimated 142,000 rooms changed hands in 2015, compared to 190,000 in 2014, the report said. (The report noted, however, that 2014's numbers were affected by Jin Jiang's acquisition of Louvre Hotels' 90,000-room-strong portfolio.)
"Strong investment demand was supported by positive industry fundamentals as year-on-year RevPAR growth in all but two of Europe's 20 major markets continued on an upward trend," the report claimed, also citing "numerous" mergers and acquisitions, including Marriott's purchase of Starwood Hotels & Resorts and AccorHotels' acquisition of Fairmont Raffles Hotels International. Since these M&As have not yet been completed, however, they were not included in HVS' report.
Country by Country
The UK saw the most transaction activity during 2015, accounting for 48 percent of total volume. Significantly, London saw 63 percent of all single asset transactions. Notable deals in the capital during 2015 included the sale of the Ace Hotel London Shoreditch by Starwood Capital for €206 million (€800,000 per room), the sale of the Holiday Inn London Kensington Forum for €540 million (€596,000 per room), and the purchase of the St Ermin’s Hotel by the Chen family’s Sunrider International for €213 million (€700,000 per room).
After years of economic struggles, Spain saw a rise in deal activity, recording a transaction volume of €2 billion—double 2014's numbers. The volume and the numbers demonstrate how well the country's market has recovered from the global financial crisis that left buildings partly constructed all over the country.
Germany, meanwhile, registered the second-highest number of hotel sales, with transaction volume more than doubling compared with 2014. In France, Total transaction volume decreased slightly, with €1.6 billion registered in 2015 compared to €1.8 billion in 2014, a drop of 11 percent. (Again, Jiang's Louvre acquisition skewed the results.) According to the report, in "real" terms, France actually saw increased levels of both smaller portfolio deals and single-asset transactions. In terms of larger deals, AccorHotels purchased a portfolio of 43 hotels with a total of 4,237 rooms from Foncière des Régions for a total of €281 million.
"Despite current economic woes and increased volatility in the stock markets, there is no immediate end in sight for interest in the hotel sector as underlying operating fundamentals are trending upwards," report co-author Adrian Ruch, HVS Hodges Ward Elliott senior associate, said. "We would expect strong investor demand to continue with no immediate slowdown, particularly given that the fourth quarter of 2015 accounted for a third of the year’s total transaction volume. However, given the UK’s recent dominance within the European transaction landscape, attention this year is likely to shift to other markets such as Germany, France and Benelux."