Investment into the hotel sector will reach a peak in 2015, according to the latest European Hotel Market Survey launched today by international law firm Berwin Leighton Paisner (BLP). The report brings together the views of over 300 hotel industry professionals.Karen Friebe, BLP Hotels Group Partner unveiled the results of the survey as Berlin’s annual International Hotel Investment Forum (IHIF) kicked off today, 2 March 2015.
The survey found that well over two thirds (70 per cent) of respondents believe that hotels continue to outperform more traditional commercial property investments. A number of factors are thought to be behind this, including an increase in available capital and lending and investors diversifying.
Additionally, global transaction volumes have rocketed to levels not seen since the boom years prior to 2008. Over half (55 per cent) of respondents predict that Western Europe will benefit from the majority of global investment this year due to the stable geopolitical environment it offers. Supporting this, the flow of funds coming in from the Middle East, China and the USA into the Western European economy will likely continue.
Other key findings include:
• 88 per cent of survey respondents expect to see more restructuring or debt and refinancing deals this year with banks predicted to be the top debt providers, closely followed by debt funds.
• Franchising is ranked as the most important growth model followed by asset ownership and joint ventures.
• Private equity is leading the way as the top equity investor in the industry, with investment into Europe from North American groups set to continue in 2015.
Karen Friebe said: “Our survey reveals a strong and optimistic feeling around the hotel industry this year with investors being advised to capitalise on the current boom. It seems that the levels of activity and increased availability of debt and equity in the industry will be sustainable for at least the next 12 months.
“However, it is also fair to say that confidence in continued growth was much lower with this year’s survey respondents than with last year’s – an indicator that we are probably climbing closer to the top of the current cycle. In addition, hotels are still perceived by many as a risky asset class – meaning that the wider investment community could miss some attractive opportunities this year.”
European Hotel Market Survey 2015: Top Ten Trends
1. 70 per cent believe that hotels will continue to outperform “traditional” commercial property investments.
2. 80 per cent say hotels are becoming more of a valued asset class for investors, but are still perceived by many as risky.
3. Almost two thirds (62 per cent) think more hotels are taking on the franchising model for growth.
4. Hotels continue to face new distribution channels, causing a greater loss of control over room rates
5. 89 per cent foresaw increased competition from the residential market with short term lets.
6. 91 per cent of hotel professionals plan on increased spending into social media to help improve communications with clients.
7. There will be an increase in spending on technology within hotels (better Wi-Fi and in-room entertainment).
8. The past year has seen private equity displace other equity investors in the hotel sector
9. High net worth individuals are also heavily investing in trophy assets with markets such as London and Paris viewed as safe havens for investors.
10. Employee turnover rates are still higher than in the rest of the private sector.
BLP acts for clients across the entire lifecycle of hotel-related projects, including investment and development, lending, mergers and acquisitions, management agreements, franchising, operations, health and safety, licensing, tax, intellectual property and litigation. Its specialist hotels lawyers acted on over £1bn of hotel-related transactions last year.
