Savills has reported a major increase in hotel transaction volumes in Europe’s smaller cities in 2014, with totals rising by as much as 94% in Dublin to €234 mln and 39% to €411 mln in Berlin.

Savills has reported a major increase in hotel transaction volumes in Europe’s smaller cities in 2014, with totals rising by as much as 94% in Dublin to €234 mln and 39% to €411 mln in Berlin.

The growth is being driven by the limited availability of stock in London and Paris, rising visitor numbers and operational performance improvements which are boosting investor confidence, according to the broker's latest European hotel report.

Additionally, Savills found that hotel transaction volumes across seven European gateway cities, which also included Madrid and Amsterdam, rose by 2.3% to just over €5 bn last year compared to €4.89 bn in 2013. Despite growth in the smaller cities, London and Paris continued to lead with 45.5% of total transactions in the former, equating to €2.3 billion, and 26.1% of transactions in the latter, equating to €1.3 bn.

Among the cities examined by Savills, domestic investors were most active in London, where they accounted for 55.9% of transactions, while in Dublin they accounted for 41.9%. Overseas investors also continued to be prevalent, spending €3.4 bn across the seven cities last year. Middle Eastern and Asia Pacific investors broadened their focus beyond London and Paris, with major deals including the Chinese Dalian Wanda Group’s €265 mln purchase of the Edificio España in Madrid and Qatar Holding’s €110 mln acquisition of the St Regis in Rome.

Marie Hickey, commercial research director at Savills, commented: 'The troubles that faced Europe during the financial crisis and subsequent dampening of international travel within the region have well and truly subsided, with overseas visitor numbers rising last year in all of the cities we looked at. This will put further pressure on supply, particularly in the more constrained markets.'

Savills highlights London, Amsterdam and Dublin as the cities with the most constrained supply relative to average overseas visitor numbers, with hotel rooms per 1,000 visitors standing at 6.0, 5.5 and 4.9 respectively. All seven markets examined by the firm showed an increase in revenues per available room (RevPAR) during 2014, led by Dublin and Madrid with 11.3% and 10.2% respectively, largely driven by the strong growth in visitor numbers.

Tim Stoyle, hotels director at Savills, added: 'Improving operational performance is luring back investors and enticing them to look beyond the luxury 'trophy' assets that dominated activity in the early years of the financial crisis. Volumes are expected to increase this year, with the fall in the euro meaning we are likely to see an increase in activity from non-European investors in the region.'

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