HOTEL MARKET BEAT (Q1 2023)
The hotel investment activity in Europe is heating up
According to our research, the transaction activity in Europe during Q1 2023 is estimated to reach €4.1Bn. This represents a robust growth of 18% compared to Q1 2022 and can be considered a very positive trend given the high financing costs and uncertain economic and geopolitical climate.
Several major deals drove this strong growth, including the sale of Westin in Paris, Mandarin Oriental in Bodrum and Le Richemond in Geneva. Nevertheless, investment activity on a 12-months basis – which smooths the impact of unusually large deals – shows hotel transaction volumes in Europe grew by about 3% for the running 12 months ending Q1 2023, compared with the running 12 months ending Q1 2022. The strongest growth rates were recorded in Portugal (+192%), France (+122%) and the Netherlands (+108%). Regarding the total volume transacted, France, the UK and Spain remained Europe’s largest hotel investment markets, accounting for 52% of transaction volume for the running 12 months ending Q1 2023.
Cushman & Wakefield’s Hotel Market Beat reports provide an overview of the hospitality sector trends, with a focus on hotel transaction activity. These reports are available on a pan-European level as well as for the key hotel markets within Europe.
Note: A contingency of 5% is assumed for 2022 and 2023 Q1. This is based on the past experience when additional deals being revealed several months after the end of respective periods.
Learn more about the initial findings by downloading the report.
HOTEL OPERATOR BEAT (H1 2023) – PRELIMINARY RESULTS
Cushman & Wakefield presents the preliminary findings of the H1 2023 Hotel Operator Beat, a survey of leading operators in Europe, covering 9 different markets (France, Italy, the UK & Ireland, the Iberian Peninsula, Benelux, DACH, CEE, SEE and Turkey).
This is an ongoing survey which started on 21st April 2023.
As of 5th May, the survey was completed by 125 executives representing over 78 operators with an existing presence in Europe or interest in entering the region. The interviewed operators represent over 5,192 hotels with over 567,000 rooms already operating in Europe, with an additional 919 proposed hotels comprising over 125,000 rooms in the pipeline.
Learn more about the initial findings by downloading the report.
MARKET BEAT – UK: H1 2023
UK hotel transaction volumes have remained resilient in the first half of 2023 despite market headwinds, supported by the private markets (with sub-£15m ticket sizes) and value-add opportunities with compelling growth stories. We anticipate an uptick in activity towards the back end of the year, with the closing of a number of key trades in Q3 and Q4 as well as several significant assets expected to be brought to market. The Bid: Ask spread is starting to show signs of more convergence, supported by a plateauing of the cost of debt and a general shift from a “wait and see” attitude towards more active decision making from both buyers and sellers. This will be fuelled by a clearer view on full-year 2023 trading and continued confidence in the hotel market, especially compared with other asset classes.
For the full UK Market Beat, download the report.
MARKET BEAT – Europe: H1 2022
Hotel transaction volume across Europe reached just over €7 billion during the first six months of 2022, with 319 properties changing hands. Despite the strong recovery of travel demand and the wall of capital looking for opportunities, transaction activity remained flat compared to the same period last year, with investor appetite constrained by rising financing and operating costs, fears over consumer confidence and a lack of willing sellers.
However, a slightly different picture is portrayed at the country level, with several markets recording notable growth in transaction activity. The following are the key highlights across the top-5 European markets:
- UK – With almost €2 billion of transacted volume, the UK remained the most active hotel investment market in Europe during the first half of 2022 (+40% compared to H1 2021). Investors have shown continued confidence in the UK core markets, with several notable portfolio deals being closed, such as Tristan’s acquisition of a majority stake at Point A Hotels and KSL’s investment in Pig Hotels UK (brokered by Cushman & Wakefield). However, transaction activity has slowed in the last 2 months, as the gap between buyer and seller expectations widens.
- Spain and Italy –The rising popularity of resorts among investors, as well as the continued attractiveness of major gateway cities with a strong leisure appeal, resulted in an approximately 50% increase in hotel investment activity in both Spain and Italy during H1 2022. This was supported by several significant deals such as the sale of Hotel Princesa Plaza in Madrid and 7Pines Resort in Ibiza in Spain or Rosewood Castiglion Del Bosco and Hotel Majestic in Rome (brokered by Cushman & Wakefield).
- France - Despite the rising cost of financing, macro-economic and geopolitical concerns, the strong attractiveness of the Parisian hotel market and the popularity of resorts has allowed for healthy growth of transaction activity in France during H1 2022, reaching nearly €930 million (+10%). Noteworthy deals include Club Med Alpe d'Huez, Club Med Grand Massif Samoëns Morillon, and Crowne Plaza Paris Neuilly (brokered by Cushman & Wakefield).
- Germany – With about €730 million of transaction volume during H1 2022, Germany stands among top-5 most active markets in Europe. However, compared to the same period last year, the country recorded about a 36% decline due primarily to a marked increase in debt costs. In addition, the recent spike in prime office yields has begun to impact hotel pricing, holding off sellers from putting their assets on the market. Furthermore, the market for forward deals has slowed as developers are battling increased construction costs, supply chain disruptions and financing obstacles. Nevertheless, Germany is experiencing a relatively active M&A market, with ongoing consolidations in the hotel operating market (although not recorded as a real estate transaction).
Overall, the top-5 European hotel markets in H1 2022 (UK, Spain, Italy, France, and Germany) accounted for about 81% of transacted volume, compared to 68% in H1 2021. Buyers seem to be retreating to the safety of core markets, with transaction activity slowing down notably in the rest of Europe (-41%). This cautiousness among investors, reflecting the economic and geopolitical uncertainty and the difficulty in securing financing in less liquid geographies, is likely to continue in the coming months until confidence recovers, or more distressed opportunities come to market.
For the full European Market Beat, download the report.
HOTEL OPERATORBEAT – UK & Ireland: H2 2021
We surveyed international and national hotel operators active in the UK & Ireland to determine their interest in the key hotel locations, when they expected the hotel market to recover and what the current transactional challenges are.
For the UK & Ireland hotel operator overview, download the findings
HOTEL INVESTORBEAT – Europe: H1 2022
The survey was conducted by Cushman & Wakefield during April and March 2022. It was completed by 56 respondents, including senior representatives of major private equity firms, funds, REITs and other institutional investors active in the European hotel real estate market. The respondents’ firms invested in aggregate over EUR 20 billion during the last five years (2017-2021), accounting for about a fifth of all hotel transaction volume in Europe. Download the findings.
Key findings - Hotel investment sentiment
- Despite the unprecedented impact of the pandemic on global tourism, investors believe in the future of the hospitality sector in Europe, with most investors intending to deploy more capital into European hotels than before the pandemic.
- European urban gateways remain on the top of investors’ radars, with Paris, London, Amsterdam, and Madrid leading the way. Nevertheless, investors are also optimistic about the leisure destinations expecting them to fully recover already by 2023.
- Rising construction and utility costs are the top concerns for investors. On the other hand, respondents seem less concerned about market liquidity and operator/tenant uncertainty both being mostly considered as low or non-existing challenges.
- 3-9% is the premium expected by investors for hotel properties with the highest ESG certifications (on average).
Contact us for further insights and analysis.