When investment conference panelists agree it is a good time to be both buyers and sellers of hotel real estate, you know the business cycle is in one of its most preferred moments.
Opening sessions on Monday in Berlin at the International Hotel Investment Forum (IHIF) more or less conceded prices in gateway cities already might be getting a bit too frothy (+20% in the UK since 2013) and are being bid up by cash-rich sovereign wealth funds looking for stable investment vehicles, but the good news is that the region is in the very early days of its up cycle and even asset flippers have some runaway to realize hoped-for further appreciation in values.
Smith Travel Research was first on stage and delivered the first bit of good news citing that revenue growth is equally split by occupancy and emerging rate growth. Europe had its strongest January performance in six years and also marked the 18th straight month of RevPAR growth.
Roy March of Eastdil Secured put it succinctly by saying good operating fundamentals and continued cheap capital means a bullish outlook for buyers and sellers. It is so good, he said, that capital searching for a home is even willing to migrate to secondary asset classes and markets in Europe. He added that U.S.-based private equity is looking to buy in Europe due to the sweet spot in the European cycle, and because equally attractive buying opportunities are growing slimmer.
Adding to sellers’ glee was Chris Day of Christie + Co., who noted that the outbound flow of Chinese capital is really just getting started as restrictions continue to ease.
The only potential bumps in the road Day sees are global political and global economic in nature, and that some buyers might decide to wait a year to let prices cool off or settle down. But at the end of the day, specific assets on the market that have solid upsides are likely to add to the growing M&A totals for the region, even among the more discerning buyers.