HVS: Renewed Investor Interest Prompts Rise in European Hotel Deals

LONDON—Hotel real estate was the star performer in Europe’s property market in 2014 with transaction volumes growing faster than other asset classes such as office, industrial or retail space.

According to the annual European Hotel Transactions report, published this week by HVS and its brokerage and investment services division, HVS Hodges Ward Elliott, last year saw European hotel transaction volumes up 86% over 2013.

Renewed interest in the hotels market has been driven by the comparatively attractive income returns hotels offer and their potential for improvement through clustering, management reorganization or rebranding, noted HVS.

The U.K. was Europe’s most active hotel real estate market, followed by Germany, then France. Together, these three markets accounted for 59% of total European transactions during 2014, according to the report.

“Demand for prime assets across Europe’s key gateway cities is still very strong,” commented report coauthor Jill Barthel, analyst, HVS London. “Prices in capital cities such as London and Paris are very high, prompting investors to increasingly consider secondary and tertiary investment locations, particularly in the U.K.”

The year saw the highest level of single-asset hotel transaction volume on record, 72% higher than in 2013.

Single-asset deals in the U.K. were up 40% year-on-year with the country’s strong economy and good hotel operating results driving investment in both London and the regions, said the report. Significant deals included the sale of the London Edition to ADIA and Strategic Hotels & Resorts’ sale of the Marriott Hotel Grosvenor Square to Hong Kong-based Joint Treasure International.

Portfolio transaction volume across Europe grew faster than that of single-asset deals. The year saw portfolio volume double year-on-year, helped significantly by the largest deal of 2014, Shanghai-based Jin Jiang’s acquisition of the 90,000-room Louvre Hotels Group from Starwood Capital.

“The hotels sector has once again renewed its popularity and is becoming something of a favorite with investors. This has been prompted and supported by strong hotel performance in key cities and looks likely to continue as long as the economy across Europe continues to grow,” commented report coauthor Adrian Ruch, analyst, HVS Hodges Ward Elliott.