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Cushman calibrates Covid-19 impact on hotel investment

Overseas investors in European hotels retreated to their home markets in the face of Covid-19 uncertainty and deal volume slumped by 55.4% in the first half of the year according to Cushman & Wakefield.

The firm’s deals data indicates that 78% of the €5.7 billion transactions recorded originated from within Europe.

Furthermore, 79% of deal volume transacted was actually agreed before the pandemic began. The firm also reports that the number of properties sold was down by 60% to 169 compared to the corresponding period in 2019.

Jonathan Hubbard, head of hospitality EMEA at Cushman & Wakefield

“The hotel sector across Europe has been hit hard by Covid-19 lockdowns, which have understandably resulted in a sharp drop in investment volumes as investors take stock and await signs of a trading recovery,” Jonathan Hubbard, head of hospitality EMEA at Cushman & Wakefield said.

Nevertheless, the firm points out that deals worth €1.2 billion were agreed after the outbreak commenced, “confirming that there are investors confident about the long-term prospects of the hotel sector”.

Transactions in which the final price was agreed post-lockdown, include the acquisition of the 136-key Ritz London by a Qatari investor, and the purchase of 304-room nhow hotel in Berlin by Swiss-listed Eastern Property Holdings.

RevPAR and average occupancy fall

The affect of the pandemic on hotel businesses was reflected in the RevPAR (revenue per available room) in Europe which declined 58% in the first half while average occupancy fell to 34%.

Institutional investors have been the most active buyers during the last six months, accounting for 48% of total volume transacted. C&W points out that these buyers typically have better access to capital, strong financial capability to withstand temporary challenges and frequently have a longer-term investment strategy.

H1 sales focused on prime assets in core locations so the average price per room actually increased, by approximately 26% to €239,000, compared to €189,000 per room in 2019.

Ritz sale buoys UK figures

The Ritz sale also meant that the UK remained the highest volume market for hotel investment in H1 2020 (€1.8 billion) – The Ritz deal represented nearly half of total deal volume.

Germany deal volume was the second highest (€0.9 billion) and it was the market in which the largest number of properties and rooms were sold.

Spain, in third place, was one the few countries to record increased investment volume, up by 52%. C&W said this was attributable to KKH Property Investors’ €220 million sale of the Madrid Edition hotel to Archer Hotel Capital.