ME investors spend $3.2bn on European hotels

Global hotel consultancy HVS London has reported that total hotel transactions across Europe reached a value of €7.7 billion (US $10.6 billion) in 2013.

From that figure, Middle Eastern buyers have played a significantly part in global hotel investment, with capital from the region reaching 30% of total volume in 2013, up from 12% in 2012, and totalling €2.3 billion ($3.2 billion), up from €646 million ($889 million) in 2012.

The figures were released by HVS London on the first day of the International Hotel Investment Forum (IHIF) in Berlin, with the report highlighting notable transactions including Constellation Hotels’ acquisition of the Groupe du Louvre Portfolio (four hotels) from Starwood Capital for €700 million, ADIA’s (Abu Dhabi Investment Authority’s) purchase of 42 Marriott hotels in the UK for €640 million, and the purchase of the Malmaison and Hotel du Vin portfolio by private equity firm KSL for €234 million.

Report co-author Veronica Waldthausen, an associate at HVS London said: “The European hotel industry has signalled positive trends throughout 2013. Most markets have seen occupancy and average rates grow with hotel transaction volume reaching its highest point since 2007. Financing for prime assets has become more readily available, both from domestic as well as overseas banks, changing the hotel investment landscape,”

It was also revealed that institutional investors, including sovereign wealth funds, accounted for approximately 42% of portfolio buyers and 19% of single asset purchasers.

In addition, hotel operators have shown an interest in purchasing strategic assets as part of their expansion plans, including Mandarin Oriental acquiring the Mandarin Oriental in Paris from their joint venture partner Société Fonciére Lyonnaise for €290 million, and The Dorchester Collection purchasing the Eden Hotel in Rome for €105 million from Starman.

Report co-author Louise Fury said: “We expect HNWIs and sovereign wealth funds from both Asia and the Middle East to continue to play an even more important role in the European real estate market as they seek to invest in prime assets. Additionally, North American investors - primarily private equity companies, real estate investors and institutional investors - will eye Europe as an attractive region with continuous growth potential and comparatively better value for money.”

“The question now is whether there be enough assets available for sale to meet investor demand?” added Fury.