hotels & hospitality - jll · 2 hotel intelligence: belgium authors introduction no growth in...

The Belgian hotel sector has proven to be relatively stable in comparison to the

wider economy. The majority of investor interest is still concentrated on

Brussels which benefits from its international exposure and strong

governmental and corporate markets.

Hotels & Hospitality

Hotel Intelligence Belgium 2013

2 Hotel Intelligence: Belgium

Authors

Introduction No growth in 2012 and 2013 Good balance between domestic and foreign visitation Ownership remains largely European Investment activity remains subdued but interest persists Interest for quality product in Brussels will remain high

Table of Contents

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Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group’s hotels and hospitality specialists pro-vide independent and expert advice to clients, backed by industry-leading research. For more news, videos and research from Jones Lang LaSalle’s Hotels & Hospitality Group, please visit: www.jll.com/hospitality

Josef Filser Associate, EMEA [email protected]

Marcus Linden Research Assistant, EMEA [email protected]

Hotel Intelligence: Belgium 3

Introduction

Economy: Belgium was significantly impacted by the Euro Crisis and GDP contracted by 0.3% in 2012. The near-term outlook is challenging and GDP is forecast to contract by 0.2% in 2013. Weak consumer confidence, austerity measures and sluggish exports are currently preventing an uplift in economic activity. Growth is expected to return in 2014 at around 0.4%. Tourism: Belgium tends to be popular for its central location in Europe, its accessibility and its cultural heritage sites. Most tourists visit Flanders, the northern section of Belgium, which offers cultural and historic cities such as Ghent, Bruges and Antwerp. Business tourism, particularly international business demand, is largely concentrated in Brussels. Tourism in Belgium is split almost evenly between domestic and international visitation and showed stable growth in 2010 and 2011. In 2012, tourism demand remained largely flat, the market seeing a minor increase in arrivals and a small decline in overnight stays, when compared to 2011 figures. Investment Market: The Belgian hotel market, particularly in Brussels, tends to be seen as a relatively safe and resilient market. Especially the upscale hotel segment in Brussels has proven to be robust due to strong government and corporate demand. A majority of single asset transactions have been taking place in the capital with the most recent sale being the Pullman Brussels Airport in 2011. In the short to medium term we expect continued investor interest from both operators and international real estate investors planning to grow their presence in European gateway markets.


No growth in 2012 and 2013

Belgium has a very open economy that is strongly dependent on foreign trade, with exports accounting for roughly 80% of its GDP. Belgium’s industry is primarily concentrated in the more heavily populated Flanders region and its economy is strong in the steel, textiles, chemicals, pharmaceuticals, food processing, electronics and machinery sectors. Belgium’s capital, Brussels, is home to many international institutions, and houses the headquarters of the European Union and NATO.

The Belgium economy, like many of its neighbouring economies was negatively impacted by the sovereign debt crisis and economic turmoil in southern Europe. According to IHS Global Insight GDP contracted by 0.3% at year end 2012. The economy is expected to struggle in 2013 and GDP is forecast to decline by 0.2%. Current factors preventing a rebound in growth are weak consumer confidence, growing unemployment and poor export performance.

A major challenge of the Belgian economy is its high public debt level which increased from 84% of its GDP in 2007 to about 100% in 2012. Although public debt has declined from more than 130% of GDP in 1993, the country must reduce its debt to 60% of GDP to comply with European Union rules.

The government has therefore implemented various austerity measures to get its public deficit below 3% in the coming years. At the time of writing the public deficit for 2013 and 2014 is projected at 2.9% and 2.5% respectively. The government plans to consolidate its finances by 2015.

F = Forecast Source: Global Insight, February 2013

Belgium: GDP Growth

-5%

-3%

-1%

1%

3%

5%

2006 2007 2008 2009 2010 2011 2012P 2013F 2014F 2015F

European Union Belgium

Belgium: Economic Indicators

2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F

Real GDP growth 2.7% 2.8% 0.9% -2.7% 2.4% 1.8% -0.3% -0.2% 0.4% 1.5%

Consumer price inflation (av.) 1.8% 1.8% 4.5% -0.1% 2.2% 3.5% 2.8% 1.6% 1.7% 2.2%

Unemployment rate 8.2% 7.5% 7.1% 7.9% 8.3% 7.2% 7.4% 7.5% 7.5% 7.5%

Exchange rate LCU/$ (av.) 0.80 0.73 0.68 0.72 0.75 0.77 0.76 0.78 0.79 0.73

Fiscal Balance (% of GDP) 0.1% -0.3% -1.3% -5.9% -4.1% -3.6% -3.0% -2.9% -2.5% -2.2%

Current account balance (% GDP) 1.9% 1.6% -1.6% -1.6% 1.4% -1.4% -0.2% -0.1% -0.2% -0.3%

Source: Global Insight, May 2013


Good balance between domestic and foreign visitation

Tourism in Belgium is split almost evenly between domestic and international visitation, with the latter slightly higher in importance at 55% of total arrivals in 2012. The country’s main international source markets tend to be its neighbouring countries: the Netherlands, France and the UK.

The Belgian tourist industry generates around 2.8% of the country’s gross domestic product and employs 3.3% of the working population. Belgium tends to be popular for its central location in Europe, its accessibility and its cultural heritage sites.

The majority of tourists visit the northern Dutch-speaking region of Belgium, Flanders, attracted by historical cities such as Antwerp, Bruges and Ghent, and the country’s reputation for gastronomy. Here visitors tend to stay for short weekend breaks. The coast is also popular, with cities such as Oostend and de Haan. The southern part of the country is generally appreciated for its nature. Most tourists visit this part of Belgium for camping, adventure trips, hiking and cycling.

Business tourism, particularly international business demand, is largely concentrated in Brussels. The city comprises the headquarters of the European Union, NATO and many other international organisations.

Source: Statbel

Belgium: Main Tourist Areas

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Brussels Antwerp Bruges Ghent

(000

's)

2010 2011 2012

Source: Statbel

Belgium: Overnight stays

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2006 2007 2008 2009 2010 2011 2012

International Domestic Growth Year on Year

Despite a dip in arrivals in 2009, visitation in Belgium has shown steady growth in recent years and registered a compound annual average growth (CAAG) rate of 2.3% between 2003 and 2012. This was largely due to growth in domestic visitation, whereas international arrivals remained largely flat in the same period. In 2012, visitation in Belgium increased by a minor 0.2% to 13.6 million arrivals. This was driven by minor increases in domestic and foreign arrivals. Overnight stays on the contrary contracted by 1.1% year on year.


Jones Lang LaSalle’s Hotel & Hospitality Group has undertaken a survey of 4- and 5-star hotels in Brussels comprising about 8,600 guest rooms, to analyse the current ownership structure in terms of nationality and owner type.

European owners continue to dominate the Brussels upscale hotel market. This is in contrast to other major markets across Europe, where domestic owners typically dominate. Brussels’ position as a pan-European city is thus reflected in the quality hotel ownership structure. Some 63% of quality hotel rooms are owned by European firms, whilst domestic owners account for 17%. Brussels’ European owners include firms such as Scandinavian Pandox AB and Spanish operator NH Hoteles.

As Brussels is an international business city located centrally in Europe, its hotel market has also attracted a healthy number of American owners. Owners from the USA currently account for 15% of the Brussels upscale hotel market and includes investors such as Blackstone and Host Hotels & Resorts.

Asian ownership (5%) is dominated by China’s Hainan Airlines (HNA), owning two Best Western Hotels and the Sodehotel, which is currently closed for renovation. The hotel is being redeveloped into a new 5-star hotel that is expected to open in 2014.

The Brussels quality hotel market is currently dominated by property companies and hotel operators, which own 28% and 25% respectively of Brussels’ upscale hotel supply. One of the major operators in Brussels is Spanish-based NH Hoteles which owns four upscale hotels in the city. The main property company owning hotels in Brussels is Pandox AB, which owns a total of six hotels (one midscale and five upscale) or almost 1,800 rooms.

Another large group of owners are high-net-worth individuals (HNWIs), who account for 22% of the upscale room stock. One of the most significant HNWIs is the Norwegian Olav Thon, majority owner of Thon Holdings, which controls five hotels in Brussels, of which four are positioned in the upscale segment. Institutional investors and investment funds own 10% and 9% of the 4- and 5-star room stock in Brussels respectively.

Ownership remains largely European

Brussels: Upscale Hotel Ownership by Investor Type

Property Companies

28%

Hotel Operators25%

HNWIs22%

Institutional Investors

10%Private Equity

Firms9%

Investment Funds

2%

Developers2%

REITs2%

Source: Jones Lang LaSalle

Source: Jones Lang LaSalle

Brussels: Upscale Hotel Ownership by Nationality

Europe63%

Domestic17%

US15%

Asia5%


Investment activity remains subdued but interest persists

The hotel investment market in Belgium remains relatively illiquid although interest is high in particular for quality product in high barrier markets. In particular Brussels, being an international gateway city and financial metropolis, has experienced growing interest from overseas investors and international hotel chains.

In recent years, several Belgian hotel have been sold as part of larger European portfolios, especially in the boom years of 2006 and 2007. Examples include 12 Belgian hotels sold as part of a 76-hotel Accor portfolio in 2006 and the Hilton Brussels sold as part of the Hilton Europe portfolio in 2007.

In 2011, a total of 10 Belgian hotels changed hands in the sale of a wider European Accor portfolio. The 49 hotels, located across France, Belgium and Germany, were sold for a total of €378.4 million to a consortium comprised of Predica (80%) and Foncière des Murs (20%). In the same year, ibis Brussels Centre Ste Catherine hotel (circa €12.8m) and the ibis Gent Centrum Kathedraal (circa €12.6m) were acquired by AXA Real Estate as part of a 6 asset portfolio (4 hotels in France). The portfolio was sold by Foncière des Murs for €132.9 million.

The most recent portfolio sale has been the acquisition of five Belgium midscale hotels by Frankfurt-based investment firm CTF Development, owned by the Hong Kong-based Cheng family, in April 2013. The hotels (Mercure Brussels Centre Louise, Alliance Hotel Brussels Airport, Mercure Liege, Alliance Hotel Brussels Expo and Mercure Leuven Centre) are planned to be rebranded to pentahotels. The price of the portfolio was not disclosed.

In terms of single asset transactions a majority of activity occurred in Brussels. In 2010, Allianz Real Estate acquired the Broodthaers building, an office complex which is part of a mixed-used development, for €70 million. The scheme involved a 142-bedroom Park Inn hotel which opened in March 2011. Furthermore, the Hilton Brussels was acquired by Pandox AB for €29 million. The property was repositioned as an independent hotel under the name of The Hotel Brussels.

At the beginning of 2011, property developer Allfin SA bought an existing hotel project on site of the Brussels South railway station from NMBS Holding, the umbrella organization of the Belgian railways. The 237 bedroom hotel is planned to open in June 2013 and will be branded as Pullman Brussels Midi. Another transaction in 2011 was the sale the Pullman Hotel at Brussels Airport. The hotel was sold by Accor to the Dutch property company Kadans Vastgoed for an undisclosed sum. The 125-bedroom hotel was rebranded to the Golden Tulip Brussels Airport under an 18-year lease contract.

Belgium: Hotel Transactions

Hotel Location Sale Price (€m) Grade Rooms Price/Rm (€) Buyer Origin

2012

Hotel Columbus Antwerp 7.8 3 32 244,000 Domestic

2011

Hotel Midi Development Brussels 50 4 237 211,000 Domestic

Pullman Brussels Airport Brussels Undisclosed 4 125 Undisclosed Netherlands

2010

Park Inn Brussels Undisclosed 3 142 Undisclosed Germany

Brussels Hilton Brussels 29 4 432 67,000 Sweden

2009

Sheraton Brussels Centre Brussels Undisclosed 5 508 Undisclosed UK Source: Jones Lang LaSalle


Interest for quality product in Brussels will remain high

The Belgian hotel market had witnessed an overall RevPAR contraction of 1.2% in 2012, reflecting the difficulties surrounding the Euro Crisis. Nonetheless, the hotel sector remained relatively healthy in comparison to other economic industries.

Brussels, being a financial and political hub and Europe’s most important MICE destination will continue to attract a majority of investor interest. The hotel market has proven to be more robust than the wider market due to strong government demand from the EU and NATO. The strength of the market will continue to attract overseas investors such as Chinese HNA Group which is currently investing €50 million in a new 5-star hotel.

Hotel Intelligence: Belgium

This report is confidential to the recipient of the report. No reference to the report or any part of it may be published in any document, state-ment or circular or in any communication with third parties without the prior written consent of Jones Lang LaSalle, including specifically in relation to the form and context in which it will appear. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions in respect of a considerable number of varia-bles which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome and we draw your attention to this factor. Jones Lang LaSalle makes no representation, warranty, assurance or guarantee with respect to any material with which this report may be issued and this report should not be taken as an endorsement of or recommendation on any participation by any intending investor or any other party in any transaction whatsoever. This report has been produced solely as a general guide and does not constitute advice. Users should not rely on this report and must make their own enquiries to verify and satisfy themselves of all aspects of information set out in the report. We have used and relied upon information from sources generally regarded as authoritative and reputable, but the information obtained from these sources may not have been independently verified by Jones Lang LaSalle. Whilst the material contained in the report has been prepared in good faith and with due care, no representation or warranty is made in relation to the accuracy, currency, completeness, suitability or otherwise of the whole or any part of the report. Jones Lang LaSalle, its officers, employees, subcontractors and agents shall not be liable (to the extent permitted by law) to any person for any loss, liability, dam-age or expense (‘liability’) arising directly or indirectly from or connected in any way with any use of or reliance on this report. If any liability is established, notwithstanding this exclusion, it shall not exceed $1,000.


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