Slow start for hotel transactions but market set to strengthen as year progresses
Total European hotel transaction volume fell by 69% in the year of the pandemic following a record high the previous year when €27.1bn-worth of hotel deals were struck.
Before the pandemic, 2020 was set for record transaction levels. The year started strongly with transactions in January and February up 2.5% on 2019 with volumes of €2.7bn and a 1.8% rise in the average sale prices per room to €170,000. Subsequent lockdowns across Europe coupled with limited availability of debt financing pushed transaction levels down by 66% with only one type of buyer, high-net-worth individuals, investing in larger volumes of hotels than in the previous year.
A total of 201 European hotels and more than 44,000 rooms exchanged owners in 2020. The UK retained its position at the top of the transaction table, posting the highest level of investment volume across Europe with a total of €2.1bn (£1.8bn). Some €1.6bn-worth (£1.4bn) of UK transactions were London-based.
Germany maintained second place in the transaction rankings, with total hotel investment volume for the year reaching €1.7bn. Munich was its most favoured city with €501m-worth of transactions. Looking ahead, HVS expects that the second half of 2021 will begin to show signs of transaction volume recovery as economic support programmes fall away and loans come up for refinancing, but the bulk of the recovery is likely to happen in 2022 in parallel with rising hotel revenue streams.
'The full impact of the pandemic is expected to affect the transaction market later this year with an increase in distressed debt and opportunistic investment ahead of a gradual market recovery. However, the majority of volume recovery is expected in 2022 as immunisation programmes are completed and the leisure and corporate travel sectors start to recover,' commented report author Shaffer Patrick, associate, HVS Hodges Ward Elliott, London.
'There is still a huge weight of capital looking to invest in hotels, and the availability of distressed acquisition opportunities is likely to be significantly less than expected when the pandemic began, which will support recovery in asset values. Many owners may try to hold on longer to benefit from recovering pricing before they sell,' added Patrick.
At a Glance: 2020 European Hotel Transactions
- Total transaction volume down 69% to €8.5bn;
- Single-asset transaction volume down 54% to €5.5bn, portfolio transactions down 80% to €3.0bn;
- Average price per room across all transactions down 11% to €175,000;
- Transaction volume recovery expected in H2 2021 and 2022.
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.