European hotel transaction volume up 9% in 2011: HVS

Total European hotel transaction volume rose 9% to €7.1 billion (US$9.5 billion) in 2011 despite the continuing scarcity of debt funding, according to the annual European Hotel Transactions Report published by HVS London.

HVS attributed the increase in investment activity to improved leisure and business demand as well as a number of distressed assets coming on the market in 2011. Last year’s activity involved some 116 transactions with 264 hotels and more than 43,200 rooms.

However, total volume remains well below the 2006 peak of €20 billion (US$26.8 billion) and the 10-year average since 2002 of €9.9 billion (US$13.3 billion).

Single-asset activity accounted for 54% of the total transaction volume, HVS reported. Despite this increase of 15% compared with 2010 levels, the average price per room declined 27% to €190,000 (US$254,415) due to fewer high-end assets changing hands in 2011 compared with the previous year. Institutional investors, hotel operators and real estate investors dominated single-asset transactions, accounting for 78% of total volume.

Portfolio investment painted a similar picture, with institutional investors, hotel operators and real estate investors accounting for 72% of total volume.

“In 2012 we are likely to see a marginal increase in the number of distressed sales, but with debt so hard to find, it will be some time before we see transaction volumes return to pre-credit crunch levels,” said Charles Human, managing director of HVS Hodges Ward Elliott, the hotel brokerage and investment banking division of HVS.