European hotel investment drops 41% as UK volumes plummet - CBRE

European hotel investment transaction volumes edged to €6.9 bn in the first half of 2016, a decline of 41% year-on-year.

Deals in the UK - which fell 76% - dragged down the average for Europe, where some bright spots were evident.

German hotel investment saw a 34% increase year-on-year as transaction volumes reached €2 bn in H1 2016.

Joe Stather, Information and Intelligence Manager EMEA, CBRE Hotels, said: 'Germany remains a hot market for hotel investment and has taken the long-standing mantle from the UK which has dominated investment volumes in the last decade. The strong growth has been driven by over ten notable deals in Q2 including a significant portfolio transaction.' He added: 'Interest is coming from a diverse array of investors, including REITs, institutions, private equity and dedicated real estate investors.'

CBRE said that consistently high levels of liquidity and strong market fundamentals remained key, while the large number of hotel assets encumbered by operational leases added to Germany’s appeal.

The sale of the Hyatt Dusseldorf was the biggest single asset disposal in Germany so far this year.

Despite the notable falls in the UK, CBRE reported that fixed-income investment opportunites remained buoyant there, and that the UK leased hotel environment includes a number of hotel operators with highly regarded covenants and offering 25-year index-linked leases.

The UK's current hotel development pipeline should result in £2 bn of fixed-income stock entering the country's regional market in the next three years.

France recorded 25% year-on-year growth in the second quarter of 2016 with deal volume totalling €508 mln in the first six months of 2016. Transaction volumes were largely boosted by deals on assets outside the capital, as investment activity focused on resort locations and the South of France.