50 investors surveyed collectively invested more than €26bn (£22bn, US$31bn) over the last five years, accounting for approximately a quarter of all hotel transactions in Europe
Resorts and serviced apartments have come into focus and gained popularity
The UK, Germany and Iberian Peninsula top the ranking of the most popular European regions for investors, with Barcelona dubbed the most attractive city
Over a third of real estate investors intend to buy more hotels across Europe, according to the latest research from real estate advisory firm Cushman & Wakefield.
Despite the pandemic’s disruption to the travel and tourism sector, only 21 per cent of investors intend to dial down their hotel acquisition activity while a mere 10 per cent have put plans on hold.
The results are part of a survey of more than 50 senior representatives of major private equity firms, funds, REITs and other institutional investors active in the European hotel real estate market.
The respondents’ firms invested in aggregate over €26bn (£22bn, US$31bn) over the last five years (2016-2020), accounting for approximately a quarter of all hotel transactions in Europe.
Bořivoj Vokřínek, head of hospitality research EMEA at Cushman & Wakefield, said: “The successful 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 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.”Travelling for work or leisure?
Resorts, which typically have a stronger spa offering, were reportedly the most popular type of hotel amongst investors. Despite the complexity of their operation and seasonality, 70 per cent of respondents consider them to be more attractive than before the pandemic.
Serviced apartments have also become a more attractive asset type for investors (according to 60 per cent of participants), 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.
On the other hand, hotels centred around hosting meetings, incentives, conferences and events (MICE hotels), and those located at airports, have reduced in appeal for most investors, given the deeper impact of COVID.
That said, Cushman & Wakefield predicts a return of business travel and events, as the lack of personal interaction created through distant working creates a need for structured meetings and in-person events in the future.
Some investors recognise this, with 21 per cent stating their appetite for acquiring MICE hotels has not altered as a result of COVID. Location, location, location
When asked about geographical locations, the UK & Ireland is the top target region for investors, followed by Germany, the Iberian Peninsula, France and Benelux.
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.Market recovery
Broken down by market type, leisure destinations (such as Barcelona), are expected to recover faster, with 85 per cent of respondents anticipating performance to fully return to 2019 levels (RevPAR) by 2023.
Regional cities are expected to follow, with recovery anticipated between 2023 and 2024 by 77 per cent of respondents.
Major cities that are frequently more dependent on international travel are anticipated to recover at a slower pace.
Nevertheless, 75 per cent of surveyed investors expect recovery between 2023 and 2024 and 21 per cent in 2025.
As a sector within the hospitality industry, Cushman & Wakefield’s latest results are encouraging for the spa and wellness sector as it indicates investors are still confident and actively investing money into the industry.
Furthermore, with the pandemic shifting people’s mindset about the importance of health and wellness, many of these investors are likely to complete their hospitality offering with spa and wellness facilities.