There is a wall of international capital ready to be invested in the hotel sector but distressed opportunities are few and far between, delegates heard at Real Asset Media’s Hotels & Leisure Investment briefing, which took place online on REALX.Global yesterday.
“Investors are very keen to take advantage of the crisis in the sector and have billions available to be deployed in the hospitality industry,” said Dirk Bakker, head of EMEA hotels, Colliers International. “There is enormous appetite and a lot of cash, but not enough distressed assets on the market. There are no bargains to be had.”
All of a sudden investors have become more active, both traditional players like Schroders RE, Tristan Capital and Lonestar, and newcomers to the sector like Activum SG, Orange IM, Schulte Hospitality and Pygmalion Capital.
“Yet, despite the crisis, we see no price drops compared to 2019, and that’s due to the enormous appetite from investors in the market,” said Bakker.
Lack of product has led to a two-thirds decline in hotel transactions in Europe, which mirrors the fall in international tourist arrivals. In 2019 volumes were around €30 billion, with 650 million tourists arriving, while in 2020 transactions fell to less than €10 billion and tourist arrivals were below 250 million.
A steep climb envisaged to return to pre-pandemic levels
The big question now is how fast the recovery will take. It is going to be a steep climb back to pre-pandemic levels. “2019 was one of the best years ever for hotels, and travel and tourism was the second-fastest growing sector in the world until Covid-19 hit,” said Bakker. “In 2020, there were 73% fewer overnight trips and misery everywhere. Asia was hit first and hardest, then everywhere else followed.”
It was a very abrupt end to a good run and it plunged the sector into crisis, but precedents are encouraging. After previous crises, like 9/11 and the GFC, people were keen to travel again.
“It will start with people having holidays in their own country, and travel by car will resume faster than flights,” said Bakker. “Government support schemes saved jobs and sparked a savings boom, especially in higher-income segments. People like to spend on travel and hospitality, so the sector is expected to recover quickly once restrictions are lifted.”
In Europe eight out of ten people are planning a domestic holiday in 2021. Spending on restaurants and hotels is expected to recover first, by 40% this year and then more gradually. By 2025 spending will have doubled compared to 2020 levels.