New European hotel transaction data from Cushman & Wakefield reveals that the first half of 2020 saw a marked increase in investors retreating to their home regions amid COVID-19 related uncertainty, with 78% of the recorded €5.7 billion in transactions (a year-on-year fall of 55%) originating from within Europe.
Data from Cushman & Wakefield shows that some 79% of the deal volume was agreed before the COVID-19 outbreak. There were, however, still several notable deals agreed after the pandemic outbreak, totalling €1.2 billion, confirming that there are investors confident about the long-term prospects of the hotel sector.
Examples of key transactions, with the final price agreed post-COVID-19 lockdown, include acquisition of the 136-key Ritz London by a Qatari investor, and the purchase of 304-room nhow hotel in Berlin by Swiss-listed Eastern Property Holdings.
The most active buyers during the last six months were institutional investors (48% of total volume transacted), a group that typically has better access to capital, strong financial capability to withstand temporary challenges and frequently a longer-term investment strategy.
The average price per room has increased by approximately 26% to €239,000 compared to €189,000 per room in 2019. This can largely be attributed to the changing nature of hotels sold in H1 2020, which has focused on prime assets in core locations (including the Ritz) and where there is less concern about the impact of COVID-19 on long term real estate values; rather than a suggestion of reduced yields.
Despite a notable decline, the UK remained the highest volume market for hotel investment in H1 2020 (€1.8 billion) by virtue of the sale of the Ritz which represented nearly half of total deal volume. Germany recorded the second-highest transaction volume (€0.9 billion) and was also the most active market with the highest number of properties and rooms sold. Spain, taking third place, was one of the few countries to record investment volume growth, up by 52%. This can be largely attributed to the notable acquisition of the Madrid EDITION hotel for €220 million by Archer Hotel Capital, from KKH Property Investors.
Another country seeing a notable increase in investment activity was Greece, which recorded two major resort transactions, namely a resort portfolio comprising 1,094-rooms across five seafront hotels on Crete, purchased by a joint venture between Henderson Park and Hines and an integrated 990-room Porto Carras resort on the Halkidiki central peninsula, acquired in April 2020 by Belterra Investment for more than €200 million. The seller - Technical Olympic - was represented by Cushman & Wakefield.
Both deals were agreed after the start of the pandemic and show the growing popularity of resorts among investors, driven by the positive long-term growth outlook for leisure travel as well as expected faster post-COVID-19 recovery of this segment relative to business and conference demand.
“The hotel sector across Europe has been hit hard by COVID-19 lockdowns, which have understandably resulted in a sharp drop in investment volumes as investors take stock and await signs of a trading recovery. However, investor sentiment for the sector remains positive for the medium term and the transactions that have occurred demonstrate this confidence. Nonetheless, with a very uncertain trading outlook in the short term, many well-capitalised investors are holding out for pricing adjustments or some distressed sellers to unlock more upside in their acquisitions and this is likely to be a feature of the market in H2 2020,” Jonathan Hubbard, Head of Hospitality EMEA at Cushman & Wakefield, commented.
“Compared to many other European markets, no hotel transaction has been closed in Poland in H1 2020, despite several deals already at an advanced stage. Increased uncertainty among investors caused by COVID-19 pandemic was the main reason for the transactions being put on-hold or delayed. At the same time, it should be noted that the availability of hotels designated for sale was limited despite the strong investment demand, and already in 2019, the number of hotel transactions in Poland was almost two times lower versus European average,” Łukasz Bondyra, Senior Hospitality Advisor at Cushman & Wakefield added.
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