European hotel transaction volume reached a record level of ¬23.7 billion last year, representing a 66% increase on the previous year, accordinf to the annual European Hotel Transactions report, published by HVS and its brokerage and investment services division, HVS Hodges Ward Elliott.
2015 outperformed pre-downturn levels, driven by an extremely active portfolio transactions market. Investors from Europe accounted for ¬10.9 billion-worth of transactions with activity from the Middle East up 140% to ¬4.4 billion, and that from North America up 46% to ¬5.5 billion.
“Investors were attracted by continued RevPAR growth [Rooms revenue per available room] in hotels across most major European markets while the opportunity to achieve higher investment yields than other property types kept hotels an attractive investment class,” says report co-author Dayk Balyozyan, HVS associate.
Of the ¬23.7 billion spent on hotels, portfolio volume accounted for ¬14.6 billion, more than double that of 2014, while single asset volume reached ¬9.1 billion, a 21% hike on the previous year.
The UK was the strongest driver of transaction activity during 2015, accounting for 48% of total volume, with London seeing 63% of all single asset transactions.
Significant deals in the capital during 2015 included the sale of the Ace hotel London Shoreditch by Starwood Capital for ¬206 million (¬800,000 per room), the sale of the Holiday Inn London Kensington Forum for ¬540 million (¬596,000 per room), and the purchase of the St Ermin’s hotel by the Chen family’s Sunrider International for ¬213 million (¬700,000 per room).
Spain saw a rise in deal activity, recording a transaction volume of ¬2 billion, double that of 2014 demonstrating the full recovery this market has undergone. Germany registered the second highest number of hotel sales, with transaction volume more than doubling compared with 2014.
“Despite current economic woes and increased volatility in the stock markets, there is no immediate end in sight for interest in the hotel sector as underlying operating fundamentals are trending upwards,” says report co-author Adrian Ruch, HVS Hodges Ward Elliott senior associate.
“We would expect strong investor demand to continue with no immediate slowdown, particularly given that the fourth quarter of 2015 accounted for one-third of the year’s total transaction volume.
“However, given the UK’s recent dominance within the European transaction landscape, attention this year is likely to shift to other markets such as Germany, France and Benelux.”