Lack of supply is the biggest problem in the European hotel market, delegates heard at Real Asset Media’s European Hotels Investment Briefing, which was held in Paris in June.
‘There is a real scarcity of hotels on the market at the moment, supply is extremely low,’ said Romain Gowhari, Executive Vice President, Head of Transactions France – Hotels & Hospitality Group, JLL. ‘There is a lot of frustrated capital out there and we at JLL are struggling to convince owners to put assets on the market’.
At a global level the hotels transactions market remains healthy: $66 bln were invested last year in the hospitality sector and the forecast for this year is $67 bln. ‘Unfortunately for Europe we think that the level of transactions in EMEA will decrease from €22.9 bln last year to around $21 bln in 2019 not because investors are less interested but because of the shortage of supply,’ he said.
North America and Europe are the only two continents that attract more capital than they
Export, while Asia-Pacific and China export more capital than they import. ‘We think this is going to change soon,’ said Gowhari. ‘Asian investors will invest more in their domestic markets and probably less in Europe because they have nothing to buy’.
A few years ago the expectation was that Asian capital would increase its presence in the European hotel transactions market to 20%, but actually it has been decreasing and in Q1 2019 it was only 8%, he said; ‘What we have notices is that Asian buyers are less interested in hotel properties and are focusing more on equity. They have been buying shares in the largest hotel operators’.
The European market is increasingly dominated by domestic players – in 2018 44% of capital was domestic and in Q1 this year it has gone up to 69% – but North American funds have been showing a lot of interest recently. Private equity, which represented 20% of transactions in 2016, in Q1 2019 accounted for 50% of all transactions.
PE’s growing interest has a positive side: ‘These guys are short-term holders, which means that they will sell in five years from now, which is good because there is a lack of liquidity on the European market, especially on the French market where of the assets are owned by very long term buyers, either sovereign funds or REITs or private individuals, which doesn’t give much space to the investment community’.
In the EMEA rankings the UK confirmed its first position with €5.9 bln but Spain rose through the ranks to reach a very impressive €4.9 bln. ‘There were a lot of transactions in Spain in 2018, it was a pretty healthy year but the first quarter is a bit lower so we don’t expect a further increase’.
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