Germany overtakes UK to become biggest hotel market in Europe

There were €3.92b of hotel deals across Europe in the first quarter which, nonetheless, represents a drop of 14% compared to the first quarter of 2016. However, German hotel deals rocketed by 55% in the period to €1.15b.

‘Hotel investors in Germany are increasingly willing to invest in development projects, despite the increased risk they carry, in order to secure the best locations,’ said Armin Bruckmeier, head of Corporate Hotels Brokerage Germany and CEE at CBRE in Munich.

Domestic investors dominate the hotel market in Germany but international investors, particularly French institutional investors, are becoming more active. US and Asian investors are also looking, according to Stefan Giesmann, an analyst in hotels and hospitality at JLL in Munich.

‘The hotel market in Germany is really blooming,’ he said. ‘The deal volume increased by 12% in Germany last year.’

This year. CBRE is forecasting around €4b in hotel deals in Germany, according to Martin Thom, co-head of CBRE Hotels for Central and Eastern Europe.

‘There are strong reasons for investing in German hotels,’ Thom said. “The trading performance is strong and there’s a good balance between business and leisure. Cities such as Berlin, Hamburg and Munich are very strong for trade fairs.’

And as hotel rates rise, investors are eyeing the sector keenly. This year, hotel rates in Germany’s Top 8 cities – Berlin, Stuttgart, Hamburg, Munich, Frankfurt, Cologne, Dusseldorf and Dresden – are expected to increase on average by 6% to €120 a night, according to Engel & Völkers Hotel Consulting’s (EVHC) ‘Sentiment Report Hotelmarkt Deutschland 2017’, which was published earlier this year. Stuttgart emerges as the clear winner – largely due to the presence of the automotive industry - with EVHC forecasting an increase in hotel rates there of 18% this year, followed by Berlin with 13%.

International investors have already snapped up a number of German hotels this year. In March, AXA IM- Real Assets acquired a four star hotel in Berlin via a sale-and-leaseback deal with Spanish hotel chain Abba for an undisclosed sum. Also in March, London-based real estate investment firm Queensgate Investments acquired Generator Hostels from Patron Capital and Invesco Real Estate for an enterprise value of €450m.

Apollo Real Estate is believed to be close to selling its ‘Project Tidal’ hotel portfolio comprising 13 hotels in Germany and the Netherlands, according to those who track the market. ‘It is expected to sell for around €350m,’ said one analyst, who asked not to be identified. ‘I think the sale could go through this month and it will likely be one of the biggest hotel sales this year.’

Last year marked a record year for the German hotel market, with €4.9b transacted, reflecting a tripling of the 10-year average, according to JLL. The German hotel market is attractive to investors because of Germany’s stable economy and political environment as well as the strong performance across the German hotel operating markets, according to Giesmann. ‘In addition, the comparatively strong US dollar against the euro is further adding to the attractiveness of hotel investment in Germany. ‘

Germany’s hotel pipeline is also impressive: there are between 850 and 900 projects under development, of which up to 200 will likely be completed this year, according to Andreas Erben, Head of Hotels at Colliers International.

‘German fund managers didn’t use to look at hotels. Now they have become mainstream,’ he said. ‘Many fund managers are willing to allocate 15% of their portfolio to hotels. Given that a lot of them currently invest around 5% in hotels, they still have a huge capacity to invest.’

Over in the UK, it is a different story. The hotel market is stagnating, according to CBRE, despite €1.03b of properties being transacted in the first quarter, down 0.4% y-o-y. Italy is starting to bounce back, with hotel sales up 48% in the period, albeit from a low base, to €229m. The Spanish market is also looking more buoyant, with the deal volume increasing by 24% to €564m.

The main barrier to investment in Germany is the lack of investment opportunities, according to Erben. ‘A lot of people don’t want to sell because they can’t find an opportunity to reinvest the capital,’ he said. ‘Investor interest in hotels has increased in the past year and it was already strong. The only question is: ‘Will there be enough hotels brought to market to satisfy demand?’

Quelle: Refire

#JLL #CBRE #Tourismus #Statistik

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