A survey of over 50 real estate investors by adviser Cushman & Wakefield has found that more than a third intend to buy more hotels across Europe, particularly resorts and serviced apartments, as the sector recovers from Covid-19.
Despite the disruption to the travel and tourism sector from the pandemic, only 21% of investors intend to scale down their hotel acquisition activity while 10% have put plans on hold, the research found.
The survey polled more than 50 senior representatives of major private equity firms, funds, REITs and other institutional investors active in the European hotel real estate market. Combined, these firms invested over €26 bn in hotels over the last five years, accounting for around a quarter of all hotel transaction volume in Europe.
Resorts emerged as the most popular type of hotel, with 70% of survey respondents considering them now to be more attractive than before the pandemic. Serviced apartments have also become a more attractive asset type for investors (according to 60% of respondents), undoubtedly due to their resilience during the pandemic, high-profitability and low-cost base and their flexibility to shift to the medium and long-term rental sectors.
Borivoj Vokrínek, head of hospitality research EMEA at Cushman & Wakefield, said: 'The successful Covid-19 vaccination rollout, paired with rising consumer confidence, has revived the demand to resume foreign holidays, therefore boosting investor sentiment. The eagerness to acquire more hotel real estate heavily suggests that investors are looking beyond the immediate impact of Covid-19 on the sector to a point when travel limitations are lifted and the hospitality, leisure and tourism industries can fully reopen, recognising that they will prove a strong hedge against inflation.'
Unsurprisingly, hotels centred around hosting meetings, incentives, conferences and events (MICE hotels), and those located at airports, have become less appealing for most investors, given the Covid-induced changes to working patterns and the inability and nervousness to host large-scale events in the near term.
The UK, Germany and the Iberian Peninsula top the ranking in terms of most popular European regions for investors. At a city level, Barcelona achieved the highest interest ranking among hotel investors, followed by London, Paris, Amsterdam and Munich, all dominating the top five.
Despite Covid-19’s impact on travel & hospitality, most investors anticipate only minimal discounts to 2019 pricing, as sector fundamentals remain positive. The majority of investors (59%) would consider opportunities with only a moderate discount of 15% or less, relative to 2019 levels, while 12% of investors would seek more distressed opportunities with at least a 25% price reduction.
Rob Seabrook, head of hotel transactions for EMEA at Cushman & Wakefield, said: 'While there is still some gap between seller and buyer expectations, a significant amount of capital has been raised for hotel investment, and this will need to be deployed sooner rather than later to deliver returns.
'On the owner side, while leisure travel is recovering, government support for the hospitality sector is fading away, with moratoriums being lifted. Therefore, inevitably banks and landlords will soon expect tenants to repay deferred loan payments and owed rent. This might put pressure on some owners, but the trends highlighted in this survey are reassuring and should narrow the gap between seller and buyer expectations, helping to kickstart transaction activity.'
