Despite the strong recovery of travel demand and the wall of capital looking for opportunities, transaction activity in the EU hotel market in the first half of 2022 remained flat compared to the same period last year. Nevertheless, there are five countries that are recording notable growth in transaction activity, says Cushman & Wakefield's European Hotel Market Report for H1 2022.
Hotel transaction volume across Europe reached over €7 billion during the first six months of 2022, with 319 properties changing hands. Despite the strong recovery of travel demand and the wall of capital looking for opportunities, transaction activity remained flat compared to the same period last year, with investor appetite constrained by rising financing and operating costs, fears over consumer confidence and a lack of willing sellers.
However, a slightly different picture is portrayed at the country level, with several markets recording notable growth in transaction activity. The following are the key highlights across the top-5 European markets:
- UK – With almost €2 billion of transacted volume, the UK remained the most active hotel investment market in Europe during the first half of 2022 (+40% compared to H1 2021). Investors have shown continued confidence in the UK core markets, with several notable portfolio deals being closed, such as Tristan’s acquisition of a majority stake at Point A Hotels and KSL’s investment in Pig Hotels UK (brokered by Cushman & Wakefield). However, transaction activity has slowed in the last 2 months, as the gap between buyer and seller expectations widens.
- Spain and Italy –The rising popularity of resorts among investors, as well as the continued attractiveness of major gateway cities with a strong leisure appeal, resulted in an approximately 50% increase in hotel investment activity in both Spain and Italy during H1 2022. This was supported by several significant deals such as the sale of Hotel Princesa Plaza in Madrid and 7Pines Resort in Ibiza in Spain or Rosewood Castiglion Del Bosco and Hotel Majestic in Rome (brokered by Cushman & Wakefield).
- France - Despite the rising cost of financing, macroeconomic and geopolitical concerns, the strong attractiveness of the Parisian hotel market and the popularity of resorts have allowed for healthy growth of transaction activity in France during H1 2022, reaching nearly €930 million (+10%). Noteworthy deals include Club Med Alpe d'Huez, Club Med Grand Massif Samoëns Morillon, and Crowne Plaza Paris Neuilly (brokered by Cushman & Wakefield).
- Germany – With about €730 million of transaction volume during H1 2022, Germany stands among top-5 most active markets in Europe. However, compared to the same period last year, the country recorded about a 36% decline due primarily to a marked increase in debt costs. In addition, the recent spike in prime office yields has begun to impact hotel pricing, holding off sellers from putting their assets on the market. Furthermore, the market for forward deals has slowed as developers are battling increased construction costs, supply chain disruptions and financing obstacles. Nevertheless, Germany is experiencing a relatively active M&A market, with ongoing consolidations in the hotel operating market (although not recorded as a real estate transaction).
Overall, the top-5 European hotel markets in H1 2022 (UK, Spain, Italy, France, and Germany) accounted for about 81% of transacted volume, compared to 68% in H1 2021. Buyers seem to be retreating to the safety of core markets, with transaction activity slowing down notably in the rest of Europe (-41%). This cautiousness among investors, reflecting the economic and geopolitical uncertainty and the difficulty in securing financing in less liquid geographies, is likely to continue in the coming months until confidence recovers or more distressed opportunities come to market.