Investment interest in hotels is recovering globally, as the acceleration of vaccinations and signs of economic recovery increase, boosting interest in the leisure sector.
With analysts predicting a full recovery in hotel investment by 2024, the biggest deals since the pandemic have already started taking place.
In March, Blackstone and Starwood Group bought hotel operator Extended Stay America hotel for $6 billion, while in Madrid, German Commerz Real acquired an office building at the city's airport with the intention of turning it into a 280-room hotel with brand Zleep Hotels.
“Optimism around the deployment of vaccines and an eventual recovery in tourism has started to drive activity and investors don’t want to miss the opportunity,” says Nihat Ercan, senior managing director and head of investment sales for Asia Pacific in JLL’s hotels and hospitality group. “The cycle has been reset and we are now on the cusp of a period of recovery,” he added.
Recent moves show a strong appetite for hotels from large funds that adopt various strategies to acquire assets, such as directly taking a stake or the issuance of loans that are converted into shares (mezzanine financing).
However, for now, there seems to be a gap between the prices demanded by owners and the money offered by investors. In Spain, where demand for hotels far exceeds supply, market participants point out that investors are looking for a 15 percent discount on market prices.
Hoteliers are not in a rush to sell, limiting the number of deals completed, as they enjoy support from state aid schemes provided by the Spanish government.
Government support for businesses, including an 11 billion euro package for tourism and hospitality, allowing hotels to reject low bids.
Fewer transactions in Europe
The total volume of hotel transactions in Europe decreased by 69 percent in 2020, versus the prior year, when acquisition agreements worth 27.1 billion euros were reached. According to the annual report European Transactions Hotel 2020, published a few days ago by HVS and HVS Hodges Ward Elliott, the value of hotel transactions reached 8.5 billion euros last year.
A total of 201 European hotels and more than 44,000 rooms changed hands in 2020. The United Kingdom maintained its position at the top of the table, recording the highest level of investment volume in Europe, reaching 2.1 billion euros.
Germany maintained the second place in the ranking, with the total volume of hotel investments for the year reaching 1.7 billion euros.
Looking ahead, HVS expects signs of a recovery in trading volumes from the second half of 2021 as financial support programs are withdrawn and more loans need refinancing, but most of the recovery is likely to happen in 2022. .
"The full impact of the pandemic is expected to affect the trading market later this year with opportunistic investments that will lead to an increase in distressed debt before the market gradually recovers. However, the majority of tumor recovery is expected in 2022, as vaccination programs will be completed and the leisure and corporate travel sectors will recover, "said Shaffer Patrick, an associate of HVS Hodges Ward Elliott.
"There is still a huge amount of capital looking to invest in hotels and the availability of opportunities is likely to be significantly lower than expected when the pandemic started. "Many homeowners can try to delay the sale in order to take advantage of the price recovery before selling," Patrick added.