Given the highly debated issue of real estate investment trusts (REITs) in Germany the appearance of a Hotel REIT is unlikely to occur any time soon. This was the consensus among the participants at EXPO REAL's discussion on 'Investment vehicles for hotel real estate: When will we see the first Hotel-REIT?’ While there was acknowledgment of the sector's potential, comparisons with the US market brought up a number of obstacles.
Given the highly debated issue of real estate investment trusts (REITs) in Germany the appearance of a Hotel REIT is unlikely to occur any time soon. This was the consensus among the participants at EXPO REAL's discussion on 'Investment vehicles for hotel real estate: When will we see the first Hotel-REIT?’ While there was acknowledgment of the sector's potential, comparisons with the US market brought up a number of obstacles.
Harald Mucke, managing partner at Mucke-Schollen Hotel-Asset-Management in Wuppertal, cited the large number of privately owned hotels in Germany as opposed to the domination of chains in places like the UK and the US. Then there's the contentious issue of tax legislation where, unlike the US, the EU has to contend with a different tax structure for each country. Nick Pattie, managing director at Cushman & Wakefield Hotels in London added another important factor, referring to 'the amount of information provided to the market to increase investor confidence. The US is far ahead of Europe in this respect.'
Far more probable in the short-term is a hotel property entering a REIT as part of its overall portfolio. 'Hotels are better addressed not on a single basis but as part of a portfolio of assets,' Pattie said. The question of which type of hotels might be most suitable for REITs was also addressed. 'We’ll see the low-market hotels first,' said Franz Jurkowitsch, chairman of the management board at Warimpex in Vienna. 'The one and two-star market has a more stable income and can weather economic crises better than the more up-market hotels.' This is due both to the lower volatility of the budget hotel sector as well as to their greater reliance on lease agreements as opposed to the management contracts more typical among four and five-star hotels.