colliers emea hotel investment market (2013 q3)

8/12/2019 Colliers EMEA Hotel Investment Market (2013 Q3)

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Research &Forecast Report

EMEA | Hotels2013

EMEA Hotel InvestmentMarket Update

Appetite for hotel real estate in the EMEA region

continues to strengthenIncreasing interest is particularly noted in the cities of Munich, Frankfurtand Vienna and in Poland as a whole. Te strong hotel investment trendsin Paris and London are also forecast to continue

Investor expectations for the forthcoming yearare positiveOur sentiment survey showed positive expectations despite challengingtimes currently leading to difficulties in obtaining nancing

More joint ventures in Africa are expected With informal institutions being predominant in Africa it expectedthat foreign investors are most likely to continue to seek joint venturesto enter and expand their portfolios. Sub-Saharan countries are ofparticular interest

Middle East investors continue their interestin cross-border investmentsrophy assets remain highly desirable

Transaction volume is increasing

otal transaction volume for 2013 is expected to exceed2012. Institutional investment is set to represent the majorityof transactional volume in the near future


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2 EMEA Hotel Investment Market Update | 2013 | Colliers International

Contents Appetite for Hotel Real Estatein the EMEA Region 3

Hotel Marketsacross the EMEA region 5

Western Europe 5

Middle East and Africa 6

Movementsin the Hotel Market 7

Investment Volume 7
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Appetite forHotel Real Estatein the EMEA RegionIn the past 3-4 years hotel real estate hasbeen attracting increasing interest frominvestors in the EMEA region, as illustratedby the increasing investment volumes andthe high number of cross border investors inthis segment.

In cooperation with the MBA programof Les Roches International School of HotelManagement, Colliers International hasconducted a survey among leading investorsacross the region to gauge the sentiment inthe hotel investment market. ogether with

data and market interviews the latest trendsand sentiments on the hotel market havebeen analysed in this report.

With almost 8 billion in hotel transactional activity acrossthe EMEA region for the rst three quarters of 2013, totaltransactional activity in the region is expected to exceed the8.3 billion transacted in 2012 before the end of the calendar year. In general, investor sentiment is positive for the next12 months. Te majority of investors in hotels are activelylooking to expand their portfolio in EMEA, with a focus ondevelopments. Recycling of capital is the main reason thatinvestors are considering selling hotel properties. Mostinvestors believe capitalisation rates will remain the sameover the next 12 months while only a few think there will bean improvement. With the operating component of hotelsrequiring knowledge and understanding of the link betweenhotel performance and their investment, hotels are consideredriskier than the straightforward nature of other commercial

real estate. Additionally, the type of lenders in this sector aretied to market conditions, resulting in shifts in the debt sourcesultimately impacting the activity and the prole of investors.Most investors expect that debt will be less expensive in thenext year in the region, with the exemption of the regions ofSouthern Europe and Africa.

As investor sentiment and rising transaction volume showpositive momentum in the short term, this does not meanthat worries for the Eurozone are over. Te macro-economicenvironment has only recently shown recovery with a growthof GDP in Q2 2013 of 0.3%, Germany being its main driver.Te national debt in the Eurozone area is still rising fast andcountries in Southern Europe face high unemploymentrates and austerity measures. In Northern Europe we haveseen economic recovery, but also these countries have takenausterity measures to comply with European demands.Economic growth forecasts by the IMF for the aforementionedregions are as follows:

FORECAST

2011 2012 2013 2014 2015 2016 2017 2018European Union . % - . % . % . % . % . % . % . %

Middle East and North Africa . % . % . % . % . % . % . % . %

Sub-Saharan Africa . % . % . % . % . % . % . % . %

GDP growth

Source: IMF, 2013


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UNWTO - International Tourist Arrivals

International Tourist Arrivals Received(million)

Average annual growth(%)

ACTUAL DATA PROJECTIONS ACTUAL DATA PROJECTIONS

- - - - -

Africa . . . . . . . .

North Africa . . . . . . . .

West and Central Africa . . . . . . . .

East Africa . . . . . . . .

Southern Africa . . . . . . . .

Europe . . . . . . . .

Northern Europe . . . . . . . .

Western Europe . . . . . . . .

Central/Eastern Europe . . . . . . . .

Southern/MediterraneanEurope . . . . . . . .

Middle East . . . . . . . .

Total EMEA . . .


Hotel markets across the EMEA differ and are highly dependenton macro-economic prosperity and, at a local level, on tourismarrivals. Eurostat - yearly recording the number of overnightstays saw arrival numbers between 2007 and 2009 fall byan average of 2.2% in the European Union. Although there were countries that saw increases in hotel tourism, this wasdominated in the nights spent by domestic visitors, reecting

the substitution of trips abroad for holidays in their owncountry. Between 2009 and 2011 there was an overall increaseof 4.0% of hotel nights per year with Eastern Europe regionsshowing the greatest increases. Colliers International forecaststhis trend of increasing hotel nights to continue across Europedue to the growth of world tourism as international touristarrivals are expected to increase by more than 50% until 2030(UNW O, 2013). Middle East and Africa are expected to doubletheir arrivals by 2030.

Following the World ourism Organisation, arrivals in emergingcountries in the EMEA region are forecast to grow 4.4% a yearuntil 2030. Tis is double the pace predicted for advanced

economy destinations. Investors in hotels are advised to alsofocus on these regions as arrivals are expected to exceed thosein advanced economies by as soon as 2015. In 2030, 57%(compared to 30% in 1980) of international arrivals are expectedto be in emerging economy destinations.

Source: UNW O, edited by Colliers International


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Hotel Marketsacross the EMEAregion A number of key countries and citieswithin the EMEA region are highlightedin the following section.

Western EuropeTe UK hotel market has suffered less from the economicclimate compared to other European countries due to theLondon Olympics in 2012. Te prospects for growth for thenext two years are positive; forecast at 1.9% in 2014 and in2% in 2015 (IMF, 2013). In 2012, partly due to the hosting ofthe 2012 Olympics, nearly 8,000 bedrooms were added andnew supply was at its highest for a decade. A further 5,000rooms are set to open by the end of this year. It is expected thatoccupancy will fall just below 80% meaning a decline for the

third year. Although the ADR is also anticipated to decline, byapproximately 1% by year-end 2013, rates averaging almost137 (162) are still high by any city standard. Te decline inRevPar can be explained by the steep 6.5% increase in hotelrooms in the capital in 2012 (PWC, 2013). However, this RevParlevel is still 18% higher compared to 2009. Although marketperformance is set to decline this year, the investment markethas shown to be resilient during declines of performance in thepast. Te appetite for hotel investments is projected to continue.

France recorded an improved RevPar of approximately 7.2%(MKG, 2013) and total hotel revenues have increased 2% to77 billion in 2012. With the current economic outlook, modestrevenue growth is projected. However, as a consequence of

its cultural value, the city of Paris continues to be one of theprimary tourist destinations. It recorded about 32 milliondomestic and foreign visitors per year in 2012. Te Paris regionaccommodates guests in more than 110,000 rooms, a third of which are in the 4 and 5 star category and about a third in the3 star category. Hotel transactions increased by 0.3 billion andresulted in 1.6 billion ytd. Tis is mainly due to the sale of theConcorde portfolio and the Mandarin oriental transaction.

Germany is on the radar of international hotel investors.For the next 12 months investors main focus is on Frankfurt,Hamburg and Mnich. Other cities that are of interest areBerlin, Dsseldorf, Cologne and Stuttgart. From these sevencities Mnich is the best performer with an ADR of 123(up 2.4% in 2012) and a RevPar of 92 (up 11.5% in 2012).

ransaction volume in Germany increased signicantly overthe last two years. Due to the construction of additional hotels,portfolio properties currently in the pipeline and a few largerindividual deals, it is expected that transaction pace willcontinue. Tere is also an increasing interest on the part ofGerman institutional investors. Tey are mainly focused onlong term lease contracts, as when structuring hotel real estatefunds they are restricted by law to invest in lease or hybridcontracts. Semi-institutions are allowed to sign managementagreements but often restrict themselves. In Germany this isresulting in lower LVs. An example is the Hotel Real EstateFund of Internos, with initial equity of 75 million of 4 German

Institutions concentrating on hotels with stable trading inGermany and the Netherlands with a L V of 40%.

Investors focus is also on Amsterdam, the prime market ofthe Netherlands . Te city planned to add 9,000 rooms in theperiod of 2007 2015, including 1,000 rooms in the city centre.By December 2012 approximately 62% had been completed. With the current developments, the Amsterdam market is stillperforming well with a stable occupancy of 78% and an ADR of124 (Hosta, 2013).

In 2013 (ytd) there is quite an active transaction market, mainlyfocused on trophy assets like the NH Krasnapolsky, the Pullitzer

and Roommate Aitana.


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Middle East and AfricaTe regions in the Middle East and Africa have historicallyexperienced a diverse range of economic development. Manynations from the Middle East and Northern Africa are still goingthrough political and economic transitions that followed the ArabSpring in 2011. Despite this change the Middle East and Northern

Africa still recorded an economic growth of about 4.7% in 2012. Itmust be noted that economic performance was mixed throughoutthe region with oil-exporting countries having a larger economicgrowth than non-oil countries and countries with politicalinstability.

In line with the economic growth, Africas hotel performance isalso scattered. Te most interesting places are the sub-Saharan African countries that have seen economic growth of over 5%(like Ghana and Nigeria). Also tourism infrastructure is developingat a fast pace. On top of this investors have shown increasinginterest in Morocco and Mauritius. In Western Africa, Ghana hasseen a rise in the demand for quality hotel rooms, given the rapidexpansion of the Ghanaian economy bolstered by oil and goldresources. Another city that has caught the interest of investors in West Africa is Lagos. In general, Chinese investors are highly activein real estate and infrastructure investments in the African regions. Although hotel owners from Middle Eastern countries are also visible in Africa, domestic investors are still dominant. Te mainreason is that a local network and knowledge of the specicmarkets is key. As informal institutions will be predominant,foreign investors are most likely to seek joint ventures to enterand expand their portfolios. ypically luxury hotel investmentsare most popular. However factors like political problems andinadequate infrastructure have held back growth in some African

regions. An example of a national investor prole is the West African conglomerate eyliom International. Tey foundedInaugure Hospitality in order to invest 315 million, spreadbetween 15 properties in 13 African countries constructing morethan 2,200 rooms. Generally said, Colliers International expectsthat for the above mentioned regions growth will continue at thesame pace as already experience earlier in 2013.

Like Africa, we have seen a relatively good performance in 2013in the Middle East. Although the performance in the main citieslike Dubai, Qatar, Jeddah and Doha is dispersed, region-wideoccupancy rates are close to 70%, resulting in an increase inRevPar of 9.5%. Te active hotel development pipeline is estimatedto be almost 500 hotels which are mainly classied in the Upper-Upscale segment (30.8%). Tere is little or no conrmedforthcoming supply in the branded economy hotel segment, whichsuggests an opportunity for development in the future. High Net Worth Individuals from the Middle East are not solely focusedon their own region and are mainly considering cross-borderinvestment in the stable prime markets of Europe with a focus ontrophy assets.


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Movements in theHotel MarketIt must not come as a surprise that obtaining nance for hotel

real estate investments was easier pre-crisis and the scarcityand cost of debt has been slowing down the number of hoteltransactions since then. Along with the introduction of BaselIII and the lack of economic growth within Europe, nancinghas become more difficult, often not recording L Vs higherthan 60% for hotel real estate. With these changes in the supplyof debt, the investors prole has been changing as well. Inthe EMEA we have seen a shift towards more investments byinstitutional investors. Most investors are focusing on primemarkets in the relatively stable economies in the Western partof Europe.

Capital cities such as London and Paris are traditionallyconsidered to be the top prime markets. Amsterdam is alsoin demand; three hotel transactions have already made itinto the top 10 biggest real estate investments for 2013 of theNetherlands. Investor sentiment has proven that the Europeancities of Frankfurt, Munich and Vienna are also of particularof interest. For investors, Poland is one of the most promisingcountries in Eastern Europe. Tis is in high contrast to otherEastern European countries, as investors perceive them as ahigh risk due to economic instability. Tis risk is also perceivedfor the Southern Europe region.

Te investment market for hotels was booming in the pre-crisis

years. In 2007 the transaction volume in hotels amounted to23 billion in the EMEA region. Since then such levels have notbeen reached as the investment volumes fell to levels aroundor below 10 billion. An exception is the year of 2009, when thenancial crisis hit the real estate sector hard. Hotel investment volume only totalled 4.4 billion in 2009. Te year 2012 had a volume of 8.3 billion. 2013 has started positively as in the rstnine months more than 7 billion worth of hotel real estate was transacted. As an investment volume of 1.3 billion wasrecorded in Q3 of 2013, total year end transactional volume willmost likely outperform 2012.

Investment Volume Within the EMEA region there have been several differences.In 2013 to date Germany has been performing very well with a large increase of transaction volume. According togures from Real Capital Analytics a total of 773 million hasbeen invested in hotels in Germany so far this year, this wasboosted by the acquisition of the Queens Moat Portfolio byFattal Hotel Group of 285 million. Te highest transactional volumes this year so far have been recorded in the UnitedKingdom and France totaling 2.5 billion and 1.6 billionrespectively. In both the UK and France the major acquisitions were done by the Qatar Holding, in London they bought the

Park Lane Hotel (356 million) and in Paris the ConcordeLafayette Hotel (466 million). Other important European

markets such as in the Netherlands (approx. 500 million),Italy (approx.405 million), Spain (approx. 400 million) andSweden (approx. 312 million) activity was also recorded in2013 so far. In Central and Eastern Europe transaction volumes were lower although there was activity in countries like Russia(164 million) and Ukraine (129 million). In the Middle East and Africa there have only been a handful of deals in 2013 to date.

Te graphic below reects that institutional investors have beenmore active in the region in 2013 compared to the average of thelast ve years, taking up the part of the private investors.

Investments by type of investors

Source: RCA

Equity FundInstitutionalPrivate

PublicUser / Other

12%

13%

39%

33%

19%

50%

15%

18%

1%

0%

2013YTD

2008 2013YTD

Investment Volume HotelsEMEA 2007 - 2013

* 2013 till Q3

V o l u

m e

i n b i l l i o n

30

20

10

0

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3 *


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Below you can nd the largest single asset deals and the largestportfolio asset deals up to 2013 Q3 in the region. Tese resultsunderline market insights, with a considerable focus on theprime asset class in the Western Europe region.

Looking at the type of buyers of hotel investments in the pastve years it becomes clear that most hotel investments in EMEAare completed by cross-border investors. In 2013 there has beena large volume of cross border activity with institutional foreigninvestors such as Abu Dhabi Investment Authority and the QatarHolding buying properties. Tese and other institutional investorsaccounted for almost half of the transactions in 2013 so far.

As travel and tourism will continue to increase over the coming10 to 20 years, and diversication of real estate investmentsis getting more important, interest in hotel investments willgrow further. In recent years, due to the global economic crisis,

we have seen a decline in hotel investment appetite. Last yearhowever we have witnessed an increase again. More fundshave entered the market and also private equity has joinedthe game following liquid capital markets and interestinghotel investment opportunities. Te hotel business worldwideincreasingly modernises and investors trust further stimulateshotel investment appetite. Due to the professionalisation in

hotel operations more institutional investors are interested andthe hotel investment market shows to be a good alternative tothe traditional asset classes. Te emerging markets especiallytrigger the need for professionalisation in the industry andstimulate brands in their expansion. Distribution becomesmore and more transparent as the internet has turned out tobe a game changer in this space. Colliers International expectshotel investments to break records in years to come.

Country City Property Investmentvolume ()RoomPrice ()

# ofrooms Buyer Seller

UnitedKingdom

London Park Lane Hotel , , , Qatar Holding Intercontinental Hotels& Resorts

France Paris Mandarin OrientalParis

, , , , Mandarin Oriental Societe Fonciere Lyonnaise

Spain Barcelona W Barcelona , , , Qatar Investment AuthorityOBO Qatari Diar

FCC/OHL/Comsa/BCN Godia

Italia Florence Four SeasonsFlorence

, , , , Emir of Qatar Al Mirqab(Khalifa Al- Thani)

Marcello and Corrado Fratini

Germany Berlin Maritim Hotel , , , Al Faisal Holding SEB Immo Invest

Netherlands Amsterdam Grand HotelKrasnapolsky

, , , AXA Real Estate NH Hoteles

France Nice Hotel Martinez , , , Qatar Holding JV TalaatMoustafa Group

Starwood Capital Group

UnitedKingdom

London Ceasar Hotel , , , Derby Hotels Collection Grupo Metropolis

UnitedKingdom

London Grand PlazaServiceApartments

, , , Federal Land DevelopmentAuthority

Residential Land Group

France Paris Sotel Parisle Faubourg

, , , Mount Kellet Accor

Country Portfolio Price () Buyer Seller

United Kingdom Marriott portfolio , , Abu Dhabi Investment Authority RBS

France Starwood portfolio , , Qatar Holding JV Talaat Moustafa Group Starwood Capital Group

United Kingdom Principal Hayley portfolio , , Starwood Capital Group Principal Hayley Group

France Club Med portfolio , , Credit Mutuel Gecina

Germany Queens Moat portfolio , , Fattal Hotels Goldman Sachs

Top Hotel Investment Deals 2013

Top Hotel Portfolio Deals 2013Source: RCA, Colliers International

Source: RCA, Colliers International


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COLLABORATIONTis market report is based on Colliers International EMEA Hotels insightsof the hotel market including an investors sentiment survey amongst hotelinvestors in the EMEA region. Te survey was part of the collaborationbetween Colliers International EMEA Hotels and the MBA Programof Les Roches, International School of Hotel Management and partof the renowned Laureate Group.

We would like to thank our clients for their trust by participatingin this research.

Hotel Industry Leaders | Colliers International:

Dirk [email protected]+31 20 540 5540

Andreas [email protected]+49 30 202 9930

Filippo [email protected]+971 4 453 7400

Marc [email protected]+44 20 7344 6601


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Copyright 2013 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made toensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consulttheir professional advisors prior to acting on any of the material contained in this report.

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About Colliers InternationalColliers International is a global leader in commercial real estate services, with over 13,500professionals operating out of more than 482 offices in 62 countries. A subsidiary of FirstServiceCorporation, Colliers International delivers a full range of services to real estate users, ownersand investors worldwide, including global corporate solutions, brokerage, property and assetmanagement, hotel investment sales and consulting, valuation, consulting and appraisal services,mortgage banking and insightful research. Te latest annual survey by the Lipsey Company rankedColliers International as the second-most recognized commercial real estate rm in the world.

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