European hotels return 6.9% in 2010: IPD

The European hotel property sector returned 6.9% last year, compared to returns of 14.9% reported in the UK, according to the recently-launched IPD European Hotel Performance Report, which is sponsored by Jones Lang LaSalle Hotels, Invesco Real Estate and HVS.

Capital growth was 1.3%, while income return was 5.5% in 2010.

The report, which includes 373 hotels from nine countries, aims to bring transparency to a sector relatively unknown to the average commercial property investor.

Increasingly, the hotels market across Europe has seen a growth in 'chain hotels', with budget hotels seeing the largest growth. 'Chains add value through branding, distribution and standardisation, making investments more liquid,' explained Marc Socker, director at Invesco Real Estate. 'Many in the hotel sector view investing in chains as critical to success, while simultaneously chain operators are looking for stable institutional investors as strategic partners to help their international expansion plans.'

German hotel returns were the second lowest out of the nine countries in the report, ahead of only Austria. The sector returned 3.8% per annum in 2010, a decline from 2009, though income return remained steady at 5.1%. At the all property level Germany returned 4.2% in 2010.

The French hotel sector, which ranked fifth in the analysis, saw recovering returns in 2010, of 9.7%. Capital growth remained relatively low at 2.7%, while income return made up the majority of the return, at 6.8%. However, French hotel returns remained positive throughout the downturn, with France itself maintaining its place as a leading world tourism destination.

The IPD European Hotel Performance index comprises leased hotels only, excluding vacant possession and management contract deals.