European hotel transaction volumes in Q1 2023 were down 18.6% year-on-year to a total of €3.1 bn, with the slowdown being primarily driven by Europe’s biggest hotel investment markets, UK and Germany, according to new research from Savills.
Q1 2023 volumes in France were up 136.2% year on year and although Spain reported year on year declines in Q1 2023, activity remained robust and up 25.1% against the Q1 pre-pandemic average.
Two particularly large transactions took place in Paris over the last few months which helped boost volumes, including Dubai Holding buying out their Joint Venture partner Henderson Park on the Westin Paris Vendome for a reported €650 mln. Meanwhile in Spain, volumes were supported by continued investor appetite for resort assets.
'While France and Spain continue to shine, considering slower activity in other markets and high debt costs prime yields have moved out,' said Marie Hickey, director Savills Research.
Savills prime European city yield average with a management contract operating structure moved out 16bps in Q1 2023 against Q3 2022 levels.
Hickey added: 'Higher yielding city markets in the Iberian Peninsula and Central and Eastern Europe are showing greater resilience to upward yield pressures with prime management contract yields in those markets out by only 8bps on Q3 2022 levels.'
Richard Dawes, director in Savills Hotels Team, EMEA, commented: 'Investment volumes continue to drag and we expect that activity will remain a bit weaker through to late summer, with positive momentum shifting into Q4. At the same time, we should not forget that operational performance in Europe has and continues to be exceptionally strong across most key destinations which is underpinning the market.'
