Investors drawn to German hotel sector's strong income growth - report

Germany’s hotels sector saw strong income growth in 2015, with revenue per available room (RevPAR) increasing by an average of 6.5% amid rising occupancy.

An analysis of six major cities by Christie & Co found market performance improved in most locations, with the trend expected to continue as thousands more rooms come on to the market in the next three years.

Cologne was the standout performer, with RevPAR growth of 15.6% to €80, building on a five-year average of 4.9%. Berlin also performed strongly, recording RevPAR increase of 8.4% against a background of strong supply growth.

Ingo Gürges, head of transactions at Christie & Co Germany, said: ‘This positive trend has not gone unnoticed by hotel investors who consider hotels increasingly as a serious asset class, not least due to the availability of leasehold assets in the market.

‘As the report suggests, investors are focusing strongly on business hotels due to Germany’s status as the key economic powerhouse within Europe. Along with its particularly strong trade fair and conference market, resort properties are of interest in both established leisure destinations and within economically robust micro locations.

‘Notably, investors and developers are most interested in hotels in the budget and four-star segments with a selective smaller percentage of overall activity taking place in the five-star luxury market.’

The report said that transaction and development activity in recent months indicated investors and developers were increasingly targeting opportunistic acquisitions in B cities as well as A-city assets.

Christie & Co predicted continued strong demand over the next three years, based on rising demand from hotel guests and a steady stream of visitors to conferences and trade fairs, as well as the opening of Berlin’s new airport.

Munich had the highest RevPAR at €102, an increase of 4.6% over the year, and occupancy of 79%, while Frankfurt also saw strong growth of 8.8% to €88. Hamburg recorded more stable growth of 2.2% to €85 as its occupancy rate slipped slightly to 78%.

Düsseldorf was the only city of the six to post negative figures, with occupancy falling to 68% and RevPAR down by 1.4% to €75. But Christie’s said it expected a number of major trade fairs to bring a change in fortunes in the city, where 70% of reservations are made by corporate customers.

The analysis was based on data compiled by STR Global. The full report can be downloaded here.