European hotel investment drops 16%: HVS

Single asset transactions along with the sale of hotel development sites in London have boosted what is otherwise a depressed hotel investment market, according to HVS, which predicts continued difficult trading conditions due to the scarcity of debt and uncertain economic conditions.

The first eight months of 2012 saw hotel investment activity in Europe total around €3.5 billion (US$4.58 billion), a 16% decline on the same period in 2011.

Some 46 hotels (around 9,500 rooms) each more than €7.5 million (US$9.8 million) were sold, 28% below the same period in 2011 when 59 qualifying transactions took place. Total single asset investment volume reached €2.1 billion (US$2.75 billion) in the first eight months of 2012, a 10% decline on 2011. The average sale price per room was €215,000 (US$281,132) compared with €251,000 (US$328,205) in 2011.

“Trading has been difficult in recent months for many European markets, even Paris and London have experienced a slowdown,” said Tim Smith, Director, HVS London.

As in 2011, the majority of investment has been based in the UK, where volume reached more than €1 billion (US$1.3 billion), 46% of overall single asset investment volume. In London some 12 hotels changed hands including the four-star Cavendish London for just under €200 million (US$262 million).

A number of hotel development sites have also been sold in London, including the InterContinental Westminster and Hilton Bankside. In addition, the Odeon Site in Leicester Square has been acquired by the Edwardian Group.

Investment in Germany also remains strong, accounting for 15% of total transaction volume. France has also been fairly active, accounting for 11% of total single asset investment volume.

A total of nine portfolio transactions, involving 29 hotels, have taken place in the first eight months of 2012, reaching a volume of €1.5 billion (US$1.96 billion). This represents a 22% decrease compared with the same period in 2011.

“Until debt becomes more readily available and trading significantly improves, it is difficult to estimate when the hotel investment market will improve but we hope to see transaction figures rising during 2013,” Smith said.