European Hotel Leaders Expect More Distressed Sales

Deloitte last week revealed the results of its yearly European hotel industry survey. Between mid-September and early October, the company quizzed more than 100 senior figures, including owners, operators, lenders, developers, and investors.

Here are the key findings:

• Expect more sales of distressed hotel assets. In this year’s survey, 27 percent of respondents expected to see this, double last year’s level.
• Inflation is the biggest risk to growth for the hospitality industry over the next five years, according to 83 percent of the respondents.
• Hiring remains a high priority for 63 percent of hotel leaders.

The survey asked for the most attractive city for hotel investment in 2023. The answers, listed in order of popularity, are:

• Amsterdam
• Lisbon (last year’s top pick)
• London (last year’s second-favorite)

Countries seen to be the most on the upturn in 2023 for hotel investment are:

• Portugal (33 percent)
• Spain (33 percent)
• Greece (31 percent)

Deloitte’s survey provided guarded optimism. Other signals echoed this view. Europe’s hotel construction pipeline slowly improved in the first half of 2022.

Most of the growth has been in a handful of markets. The countries accounting for half of Europe’s construction pipeline as of the end of the second quarter were, according to data from Lodging Econometrics:

• Britain, with 309 projects (46,296 rooms)
• Germany, with 258 projects (44,692 rooms)
• France, with 152 projects (17,338 rooms)
• Portugal, with 123 projects (14,811 rooms)
• Poland, with 85 projects (12,205 rooms)

The European cities with the largest pipelines were:

• London, with 80 projects (13,683 rooms)
• Dusseldorf, with 46 projects (8,492 rooms)
• Paris, with 35 projects (5,540 rooms)
• Lisbon, with 34 projects (3,850 rooms)

While some hotel investors and developers will find the next year challenging, others will find value-priced opportunities and thrive. Choosing one’s battles will be critical. Properties in city centers that enjoy considerable domestic demand or long-term contracts with global brands will prove especially attractive if one judges by the recent deal flow.

Look at some of the latest deals to see where the momentum is.

• Canada Pension Plan Investment Board (CPPIB) and UK-based hotel advisory company Hamilton-Pyramid Europe said this month they had set up a joint venture company with an initial capital of about $491 million (€475 million) for the acquisition of hotels in major cities and tourist resorts in Europe. It acquired W Rome for about $178 million (€172 million).
• Halter AG said this month it would invest about $210 million (200 million Swiss francs) over a couple of years to renovate the Sonnenberg Hotel in Seelisberg, Switzerland, along with some supporting properties around it.
• Perial Asset Management this month said it acquired a Premier Inn in Hanover for about $27 million (€27 million).

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