European hotel investment outpaces office, retail sectors

Investment in European hotels rose 86% last year, with transaction volumes growing faster than in the office, retail and industrial sectors.

HVS Hodges Ward Elliott’s annual European Hotel Transactions report found that European hotel transaction volumes totalled €14.4bn ($16.3bn), up 86% on 2013.

The London-based company said the figure was the highest recorded since 2008.

The UK was Europe’s most active hotel real estate market, followed by Germany and then France. 

The three markets accounted for 59% of last year’s European transactions.

Jill Barthel, an analyst at HVS, said: “Demand for prime assets across Europe’s key gateway cities is still very strong.

“Prices in capital cities such as London and Paris are very high, prompting investors to increasingly consider secondary and tertiary investment locations, particularly in the UK.”

HVS said the highest level of single asset hotel transactions was recorded last year, 72% higher than in 2013.

The UK recorded €2.5bn, above France’s €1.4bn and Germany’s €827m. 

Single asset deals in the UK were up 40% year on year, which HVS attributed to the country’s strong economy and good hotel operating results.

Significant deals included the sale of the London Edition to ADIA and Strategic Hotels & Resort’s sale of the Marriott Hotel Grosvenor Square for €151m to Hong Kong-based Joint Treasure International. 

Portfolio transaction volume across Europe grew faster than that of single-asset deals.

The year saw portfolio volume double year on year to €6.9bn.

The largest deal of 2014 – Shanghai-based Jin Jiang’s acquisition of the 90,000-room Louvre Hotels Group from Starwood Capital for €1.2bn – boosted figures, the report said.

In a separate study, CBRE said Asian investors could this year spend as much as €20bn on European hotels.

The advisory firm said investors were “fuelled by the liberalisation of domestic controls governing outbound investment”.

Asian hotel real estate acquisitions in Europe surged by 90% year on year in 2014 and by 20% globally. 

Asian institutional funds are, CBRE said, largely under-allocated to real estate because of stringent regulations on overseas assets.

“Hotel real estate is an ideal asset class for insurance companies diversifying their portfolios – fixed income lease terms are often longer than other asset types, and yields are presently above traditional real estate segments, even in prime locations,” CBRE said.

“This has made hotels in large European cities such as Paris, Frankfurt and particularly London attractive for Asian investors.”