Industry Update
Opinion Article26 February 2020

2020 European Hotel Valuation Index

By Sophie Perret, Director at the HVS London office and Maria Coll, Consulting and Valuation Analyst at the HVS London

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Maria  CollMaria Coll

Hotel values across Europe gained a further 3% last year according to the annual European Hotel Valuation Index (HVI) compiled by global hotel consultancy HVS, marking the third year of increase for Europe’s hotel sector.

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Most of the cities in the survey showed a positive valuation performance in 2019, with 10 experiencing value swings of over 5%. Only six of the 33 markets tracked in the European HVI showed a value decline.

The year saw increased momentum for hotels in Southern Europe, with an overall increase in values of 7% – up from 4% in 2018 – with all cities in the region showing a value rise. Eastern Europe showed a more mixed result in 2019, with some cities in the region experiencing a fall in values.

“Although a bit less bubbly than in 2018, RevPAR [rooms revenue per available room] performance for European hotels was still positive in 2019, at almost 3% up compared with the previous year,” commented report co-author Maria Coll, consulting & valuation analyst with HVS London.

“This includes a handful of countries with double-figure growth, driven by exceptional events, currency dynamics and post-event adjustments. RevPAR increases didn’t quite convert into similar profits, as GOP levels hovered just marginally higher than in 2018 owing to labour and overhead cost pressures.”

The top five growth markets in this year’s HVI (in euro terms) were Istanbul, where values rose an impressive 17%, Bucharest (11%), Bratislava (11%), Athens (10%) and Brussels (7%). While this year’s biggest value fallers were Warsaw (-5%), Moscow (-2%), Edinburgh (-2%) and Copenhagen (-2%).

“Whilst the European pipeline still remains below double figures and the lowest on a global basis, key German cities and regional UK markets are feeling the pressure of substantial new supply,” added Coll.

Although hotel values remain lower in Istanbul than other European cities, value growth was helped by the depreciation of the Turkish lira and the opening of a new airport boosting international demand for the city and prompting RevPAR to grow by more than 20% in local currency. Developer interest in the city remains strong, with some 2,100 rooms in the pipeline for 2020/21 – 3% of current supply.

Of those in negative territory Warsaw felt the impact of extensive new supply, while Moscow saw a decline on the back of a significant hike the previous year due to the FIFA World Cup.

In the UK Edinburgh experienced a -2% value decline in euro terms and a 3% drop in sterling, largely because of significant new supply entering the market over the past couple of years, although the city remains as popular as ever with occupancy levels at over 80% over the past six years.

“Europe continues to attract investors, developers and lenders, despite some persistent geopolitical instability and uncertainty, not least the potential effect which may arise as a result of the coronavirus,” added HVS London senior director Sophie Perret.

“The region’s strong fundamentals remain an attractive prospect, although the gateway markets in Europe are fully priced or close to being. The hunt for higher yields should focus investor interest on Eastern European markets, where strong RevPAR growth continues,” she concluded.

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2020 European Hotel Valuation Index

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