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European Hotel Transactions Report Says Market to Strengthen in H2 2021

European Hotel Transactions

Total European hotel transaction volume fell by 69% in the year of the pandemic following a record high the previous year when €27.1bn-worth of hotel deals were struck.

According to the annual European Hotel Transactions 2020, published this week by HVS and its brokerage and investment services division HVS Hodges Ward Elliott, hotel transaction volume reached €8.5bn last year with single asset transactions accounting for 65% totalling €5.5bn, and portfolio deals representing 35% at €3bn.

Before the pandemic 2020 was set for record transaction levels. The year started strongly with transactions in January and February up 2.5% on 2019 with volumes of €2.7bn and a 1.8% rise in average sale prices per room to €170,000.  Subsequent lockdowns across Europe coupled with limited availability of debt financing pushed transaction levels down -66% with only one type of buyer, high net worth individuals, investing in larger volumes of hotels than in the previous year.

A total of 201 European hotels and more than 44,000 rooms exchanged owners in 2020. The UK retained its position at the top of the transaction table, posting the highest level of investment volume across Europe with a total of €2.1bn (£1.8bn).  Some €1.6bn-worth (£1.4bn) of UK transactions were London-based.

Germany maintained second place in the transaction rankings, with total hotel investment volume for the year reaching €1.7bn. Munich was its most favoured city with €501m-worth of transactions.  

Looking ahead HVS expects that the second half of 2021 will begin to show signs of transaction volume recovery as economic support programmes fall away and loans come up for refinancing, but the bulk of the recovery is likely to happen in 2022 in parallel with rising hotel revenue streams.

“The full impact of the pandemic is expected to affect the transaction market later this year with an increase in distressed debt and opportunistic investment ahead of a gradual market recovery. However, the majority of volume recovery is expected in 2022 as immunisation programmes are completed and the leisure and corporate travel sectors start to recover,” commented report author Shaffer Patrick, associate, HVS Hodges Ward Elliott, London.

“There is still a huge weight of capital looking to invest in hotels, and the availability of distressed acquisition opportunities is likely to be significantly less than anticipated when the pandemic began, which will support recovery in asset values. Many owners may try to hold on longer to benefit from recovering pricing before they sell,” added Patrick.

AT A GLANCE: EUROPEAN HOTEL TRANSACTIONS 2020

  • Total transaction volume down 69% to €8.5bn
  • Single asset transaction volume down 54% to €5.5bn, portfolio transactions down 80% to €3.0bn
  • Average price per room across all transactions down 11% to €175,000
  • Transaction volume recovery expected in H2 2021 and 2022

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