London tops European hotel transaction market
According to the annual European Hotel Transactions report published at the beginning of March, the UK confirmed its leading role within Europe. In 2018, transaction volumes reached £5.3 billion (€6.2 billion), showing a 14% increase on volumes from the previous year, where transactions reached £4.7 billion (€5.5 billion).
London also firmly holds its place at the top of the European hotel transaction market, sitting way out in front of runners up Dublin. London racked up a total volume of £1.8 billion (€2.1 billion), whereas Dublin totalled £525 million (€610 million).
“Interest rates, staffing pressures and the UK’s departure from the EU will all influence the transactions market in 2019”
Alexandre Rey, co-author of the report, said: “Interest rates, staffing pressures and the UK’s departure from the EU will all influence the transactions market in 2019. The hotel investment market in the UK will most certainly face a slower year, but the rest of Europe might benefit from this slowdown as investors will seek to deploy capital elsewhere.”
European hotel transaction volumes reached a whopping total of £16 billion (€18.6 billion) last year, and although this was a 14% decrease on 2017, it’s still the fifth highest level recorded.
In 2018, a total of 655 properties, averaging 156 rooms, changed hands. Average ‘price per key’ grew by 8% last year, reflecting the quality of hotels that were sold plus growth in values. Be sure to view our other blog posts, to see which London hotels have changed hands over the past year.
Report co-author, Nicolas Auer, said: “The European hotel investment market continues to show rising popularity as an alternative asset class due to its strong yields. While 2018 may have seen an overall decrease in transactions it was compared to an exceptional 2017.”
He then followed with “Continued revenue per available room (revpar) growth across most of Europe helped support transaction levels in 2018 and despite the uncertainty surrounding Brexit, interest from overseas investors in UK hotels has remained very strong, demonstrating confidence in the future of the UK hotel market.”
2018 saw single asset transaction volumes fall 23% on 2017 levels, to the value of £8.2 billion (€9.5 billion). This represented 51% of the total transaction volume. Sales included 271 individual hotels amounting to over 45,000 rooms. Portfolio activity also decreased on the previous year, a downfall of 3% to £7.7 billion (€9 million). This equates to 49% of the total volume, with 58 transactions including over 380 hotels and over 56,000 rooms.
Reduced activity from Asian and European buyers was the main the reason for this decrease. In particular, high net worth individuals lowered their hotel investments in 2018, to £100 million (€116 million) compared to £477 million (€554 million) in 2017.
REITs (real estate investment trusts) showcased an increased appetite for hotels. Up 9% in 2018 to a total buyer volume of £1.5 billion (€1.7 billion), compared to £1.4 billion (€1.6 billion) in 2017, with private equity firms providing the largest amount of capital by buyer type in 2018 at a value of £3.4 billion (€3.9 billion).