‘Secondary cities the new frontier of hospitality’

Europe’s secondary cities are the solution to the growing problem of ‘overtourism’, experts agreed at Real Asset Media’s European Hotels Investment Briefing, which was held in Paris in June.

‘Key cities like Paris, Amsterdam or Barcelona are really suffering from overtourism, so the solution is to open up the secondary city market and regenerate hotels in these places,’ said Asli Kutlucan, Chief Development Officer, Cycas Hospitality. 

‘Overtourism is a real factor that has led some cities to come up with strong and clear initiatives to regulate and limit mass tourism,’ said Andreas Löcher, Head of Investment Management Hospitality, Union Investment Real Estate. ‘For social and environmental reasons, the answer is to spread visitors out as much as possible, away from the main city centres’.

Tourism from India and China is ‘the next big thing’, set to increase exponentially. Arrivals to Europe will more than double by 2039.

‘These tourists are happy to explore the whole country, not just the capitals, so the idea is for them to stay outside the main cities and they can move around by bus,’ Kutlucan said. ‘In the Netherlands, for example, they can stay in The Hague or Utrecht and from there travel to Amsterdam and other places’.

For investors, secondary cities offer the advantage of higher yields and less competition for assets. ‘I would put my money in secondary cities in France, where you can enjoy 10%-plus yields,’ said Romain Gowhari, Executive Vice President, Head of Transactions France – Hotels & Hospitality Group, JLL.

‘Secondary cities are a good play in Germany and France and it is an easier place for investors to start in a new country,’ said Löcher.‘It is very tough to start in Berlin’.

A good strategy is to buy a large number of smaller hotels and cluster them together to form a portfolio, said Alexandre Couturier, Partner, Clifford Chance. 

‘We are setting up a fund which concentrates on secondary locations at a European level,’ said Löcher. ‘We are very active in secondary locations in Germany, but we would be happy to look at B cities in France as well. We find regional markets very interesting because there is strong growth there’. 

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