What's driving hotel transactions in Italy

Club Med is expected to open its first “five-trident” (the company’s term for stars) European hotel in Cefalù, Sicily this year. (Club Med Cefalù)

A growing number of operators and investors actively looked at southern Italy last year as a result of the geopolitical instability in other Mediterranean markets, according to the latest stats from EY.

The country’s hotel market, which has a reputation for impenetrability, is expected to see a record high transaction volume of €2 billion for 2017, up from €1.5 billion in the previous year.

Positive Outlook

EY said that the value of hotel assets that changed hands for the first three quarters of 2017 reached €1.4 billion, close to the total for the entire previous year, which itself was up 40 percent over 2015. The company said that until 2015, trophy assets drove the investment volume in Italy, but in 2016 the arrival of hotels in prime locations boosted sales volume, in addition to distressed situations and non-performing loans.

The outlook was expected to remain positive, thanks to solid market fundamentals, fueling the interest of international and domestic investors. In particular, private equity investors, accounting for 70 percent of 2017’s volume, were expected to remain active, focusing on the non-performing loan market.

The group said that new international hotel operators, particularly from Asia, are seeking a presence in main markets like Rome, Milan, Florence and Venice with strong preference for existing assets rather than new developments. At the same time, the market was eyeing the southern region due to the volatility in rival Mediterranean markets.

The interest of core investors seeking graded yielding investment product increased over the last months, confirming that Italy is now perceived as a more stable and safe market. The increase also confirmed the revamped interest from private investors/family offices toward new developments and conversion of existing buildings in the city center and prime locations of the main Italian cities.

Who's Investing

“We are experiencing a very high interest both from investors and operators for leisure destinations in seaside destinations, mainly due to the shift of travelers from North Africa, Middle East and Turkey to Southern Europe,” Marco Zalamena, partner, head of hospitality, EY, said. Zalamena identified the top destinations for operators as Sardinia, Sicily, Capri and the Amalfi Coast, Apulia and Tuscany. “Both international and national operators are very active in searching new hotel lease opportunities,” he said, noting that Club Med is expected to open its first “five-trident” (the company’s term for stars) European hotel in Cefalù, Sicily this year.

“Driven by operators’ appetite, a number of investors—mainly core and value-add investors—are looking at leisure destinations. Core are mainly focused on mass market and large resorts with lease contracts and value add are focused on trophy and luxury assets in top destinations—Capri, Taormina, Sardinia—to be repositioned.

“CDP Immobiliare, Italy’s largest real estate investor, is very active in the leisure market having completed the acquisition of five resorts from Italian operators Valtur and TH Resorts on a sale-and-leaseback basis.”

The comments came as Carlson Rezidor Hotel Group announced the appointment of Mauro Vinci as senior director business development, Italy, with the responsibility of leading the company’s development and transaction activities in his native country. Elie Younes, EVP, CDO, Carlson Rezidor Hotel Group EMEA said that he was confident Vinci would bring his “wealth of development knowledge and experience” to support the group’s multi-brand portfolio growth across the “key” country.