HOTELS Variety proves a big draw with institutional investors

The variety and range of possible investments in the hotels sector is one of the factors behind its popularity with investors, a panel of leading experts agreed at PropertyEU’s European Hotels Investment Briefing, which was held in London this week.

‘The large institutional interest in hotels is not just due to the lack of investment opportunities in other sectors, but also to the fact that it is a transparent sector and well understood by investors,’ said Jonathan Langston, senior director of CBRE Hotels. ‘Everyone knows what hotels are and how they work in different ways: strong economies drive business travel, which is a very lucrative segment, while weak currencies can increase mass tourism.’

In some cases the two elements combine to create the perfect situation, as in Spain, which is currently benefiting from more corporate travel because of its improved economic performance and from an increase in tourism thanks to the weak euro as well as to the country’s many attractions.

Driving change
In a fast-changing, consumer-driven market with great variations ‘the most successful hotel operators are the ones who can enforce and drive change,’ said Langston. ‘The cookie cutter approach does not work anymore,’ said Habib Enayetullah, senior vice-president of real estate & asset management at Hilton Worldwide. ‘There must be multiple offerings for multiple requests. The challenge for the sector is to keep hotels relevant to changing consumer needs.’

Investors need to be in tune with what customers want, warned architect Dexter Moren, founder and managing director of DMA. ‘There is a move away from gigantic, airport-terminal-like spaces towards more intimate, boutique and design-led hotels,’ he said. ‘In places like London exclusivity is the name of the game.’

Food and wellness
Other trends are the importance of the food and beverage offering, with signature chefs and in-house nutritionists, and wellness, with spas, pool and fitness classes but also juice bars and bicycles on offer. Enayetullah agreed: ‘Food is increasingly important. Bringing Jamie Oliver into our Hilton Tower Bridge, for example, offering breakfasts as well as dinner has been a great success for us.’

Youth and dead fish
While the luxury market can be lucrative for those able to keep up with customers’ changing demands, excellent investments can be found at the other end of the spectrum. One example is youth hostels in a new reincarnation as boutique places for young travellers. ‘We have invested in Generator, a pan-European company that takes the hostel concept to a new level, with attractive, design-led accommodation at an attractive cost-point,’ said Erik Jacobs, director of transactions, hotel fund management at Invesco Real Estate. ‘It is model not driven by the real estate cycle but more by demographics, and it has different distribution channels and ways of marketing through social media.’

Whether the investment is in a five-star hotel or in a boutique hostel, attention to trends and details, food and wellness, must not come at the expense of essentials, Moren said: ‘There must be enough lifts to move people about easily, the beds must be comfortable and the rooms quiet. If the acoustics and other basics are not right, all the décor and beautiful stuff does not matter. It's just lipstick on a dead fish.’