Consolidation amongst major hotel companies will be one of the key themes of 2015 as large groups seek to grow their business or risk being taken over themselves.

Looking to the year ahead, chairman of global consultancy HVS London Russell Kett said that now is a good time to develop, acquire or invest in hotels as economic prospects are encouraging with demand for hotel rooms increasing and many parts of Europe having capacity for further rooms.

As conditions in Europe's hotel markets continue to improve, values are mostly on the rise and are expected to continue to do so for the next few years.

"Organic growth is a relatively slow way to expand, so hotel companies will be looking for opportunities to make quantum leaps, typically by buying other hotel companies and driving more value through economies of scale," he said. "Global hotel companies either have to acquire to maintain their growth strategy, or be prepared to be someone else's target for acquisition. If you're not dining, your dinner."

While the major cities of London, Paris, Rome and Amsterdam remain prime investment locations, hotel investors are also looking at cities such as Barcelona, Hamburg, and Munich, which HVS has highlighted as development 'hot-spots'. Cities to be avoided for new hotel development currently include Athens, Budapest, Kiev, Vienna and Warsaw.

"The hot cities are those which we expect to see an increase in both business and leisure demand and where real estate investors are likely to see a bigger return. It's encouraging that investors are now looking beyond Europe's four most popular destinations," said Kett.

However, a lack of available hotels on the market means that hotel transaction volumes are currently well below the levels experienced in 2005-07.

"We are seeing a number of new investors in the sector including insurance companies and hedge funds, which together with sovereign wealth funds, high net worth individuals and private equity firms ensure there is keen interest. Indeed, it is likely that the major hotel transactions this year will be dominated by private equity buyers.

"Lack of availability as well as improved demand and profitability should mean that hotel values continue to rise for the foreseeable future."

About HVS

HVS is the world's leading consulting and valuation services organization focused on the hotel, restaurant, shared ownership, gaming, and leisure industries. Established in 1980, the company performs more than 4,500 assignments per year for virtually every major industry participant. HVS principals are regarded as the leading professionals in their respective regions of the globe. Through a worldwide network of over 50 offices staffed by 300 experienced industry professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. For further information regarding our expertise and specifics about our services, please visit www.hvs.com.

Russell Kett
Chairman
+44 20 7878 7701
HVS