European hotel investment transaction volumes decline – Germany bucks trend, however

Nery Alaev writes about hotel trends in Europe.

The first half of 2016 has seen a marked drop in hotel investment transaction volumes – a sum of €6,885bn has been recorded by CBRE, a global real estate consultancy.

I’ve chosen to look further into the news and draw a conclusion on the findings.

A hotel in Munich, Germany

German strength

Interestingly, the strongest economy in Europe (although not due to tourism) managed to buck the trend and saw an increase of transactions with a similar percentage to the decrease seen across the wider continent (a 41% decrease compared to a 34% increase).

According to the reporting, strong fundamentals and high volumes of liquidity have aided Germany in the backdrop of economic turmoil across Europe, especially in tourism-focused nations such as Italy and Spain. Institutional investors (banks, hedge funds, trusts, etc.) across the continent are looking for low-risk assets – it seems that German hotels are just that.

Professional opinion

Joe Stather, Information and Intelligence Manager EMEA, CBRE Hotels, said:

“Germany remains a hot market for hotel investment and has taken the long-standing mantle from the UK which has dominated investment volumes in the last decade.

The strong growth has been driven by over ten notable deals in Q2 including a significant portfolio transaction. Interest is coming from a diverse array of investors, including REITs, institutions, private equity and dedicated real estate investors.”

‘Crossing the pond’ over to the UK, the picture is markedly different – a decline of nearly three-quarters Year-on-Year in regards to hotel investment. Despite this, the picture still remains somewhat positive thanks to secure income and desirability.

As for the future, it is expected that over €2.3m (£2bn) of fixed-income stock is due to enter the regional UK market in the next three years – this is a high amount that should instil confidence in many investors.

In summary, it seems that Germany is a safe-haven of sorts for now in regards to hotel investment – other nations face challenges in matching this hard-earned strength.

Nery Alaev

Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.