Hotel Sector
Transaction volume in hotels fell in 2017 over the previous year’s recorded €5.2bn, when 10.2% of properties were sold. In 2017 this figure dropped to 8%, and Löcher’s colleague Martin Schaller, Union Investment’s head of Asset Management Hospitality, predicts the number of transactions will continue to drop.
A new report published by hospitality consultancy HVS says that German hotel investment volume had almost doubled to €1.5bn after the first seven months of this year, with the likely full-year figure headed for over €2bn.
The German hotel sector is currently one of the most in-demand in the world, propelled by low interest rates and debt availability that has returned to pre-crisis levels, HVS found in its report.
Following the global financial crisis the sector has been on a general recovery and is now even exceeding its 2007 peak. Major recent transactions include Accor’s €722m portfolio acquisition from two Moor Park funds, in a reverse of Accor’s sale-and-leaseback of effectively the same portfolio to the firm in 2007. Ivanhoe Cambridge also sold 11 German assets, part of a portfolio of 18 European hotels, to Apollo Global for €425m.
According to HVS’s senior associate Veronica Waldthausen, “The hotel market has mirrored the wider commercial real estate market, in that higher-yielding opportunities in secondary markets are becoming more sought after. There are more transactions occurring in eastern Germany, with both Dresden and Leipzig definitely on investors’ radar. Budget hotels are also prime targets, as room yield growth forecasts in this sector remain strong and investment opportunities are plentiful.”
Hotels in Munich have the highest value, though growth has slowed over the past four years. The average room price for a hotel in the city rose to a record €269,000 last year, 15% above 2007 levels. Frankfurt displayed the highest growth rate over the period, at 25%, to €212,000 per room. Düsseldorf and Leipzig posted 20% increases to €173,000 and €130,000.
“More risk-enthusiastic investors, such as private equity funds, may even see the current climate in Germany as a perfect time to exit this market and begin to look for higher returns elsewhere in Europe,” added HVS director Arlett Oehmichen. He expects full-year transaction volume to exceed €2bn for the first time ever, despite a lack of sufficient hotel assets matching investors’ needs.
