Geopolitical tensions that are keeping tourists away from Northern Africa and the Middle East are creating long-term opportunities in the hotels sector in Europe, expert panellists agreed at the PropertyEU European Hotel Investment Briefing, which was held in London this week.
'Dislocation of demand seemed a short-term phenomenon, but now it is looking more structural,’ said Keith Evans, vice president of hotel acquisitions at Starwood Capital Europe Advisor. 'This dislocation is creating a very interesting market in Southern Europe.'
Spain has shown how resilient the tourism sector has been even during the crisis, and more recently it has benefitted from the dislocation effect. Other beneficiaries have been Italy and Portugal.
'According to our research, 25 million travellers have avoided North Africa and shifted to Southern Europe, so it is a significant move which is bound to have an impact,' said Jochen Schafer-Suren, partner and head of the hotel and leisure development at Internos Global Investors.
'There are opportunities in each European country for different types of investors, and people are increasingly willing to move further afield as the cycle develops,' said Evans. 'In Greece I would avoid Athens and the cities and focus on high-end assets in well-connected resorts in order to ensure liquidity.'
Investors should not just look South, said Dirk Bakker, head of EMEA hotels at Colliers International: 'There are many areas of opportunity in Europe. There is a lot of tourism in the Baltics and the Nordic countries, Montenegro is growing very fast from that perspective and Croatia is also interesting and capital is available because it is now on the EU bandwagon.'
Asian investors tend to be more traditional, he added, and prefer to look at Germany or Holland and avoid France, 'where they see strict regulations and political uncertainty.’
In Germany ‘Berlin is known as a cemetery for 5-star hotels, but build a 3-star hotel and you will do well, because tourist numbers are growing fast,' said Schafer-Suren.
The opportunities come not only from foreign visitors but also from domestic tourists, said Andreas Locher, head of hotel acquisitions & sales at Union Investment Real Estate: 'On the German coast there is huge and growing demand from domestic travellers who are avoiding Turkey, and there is a clear lack of branded hotels.'
The jury's out on prospects for the UK hotel sector after Brexit. Some investors who take the long view see an opportunity to come into the market at a discount as sterling is weaker and they are prepared to ride out the volatility in order to gain a currency advantage and exposure to the market.
Other investors prefer to avoid the uncertainty that the process of leaving the EU will entail. 'The UK was at peak level before the referendum and is a mature market, there are more opportunities in Europe,’ said Schafer-Suren. ‘Many people do not want to invest in the UK because of the lack of clarity over the future.'
