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C&W reveals full extent of CEE hotel market pain in 2020

Figures released by Cushman & Wakefield have revealed just how hard Central and Eastern Europe’s hotel real estate market was damaged by the recent health crisis in 2020. While there had been expectations of a €1.8 billion transaction volume, the reality was €370 million among the CEE-6, Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia. The figure was 74.2% down on 2019’s €1.4 billion which was a steeper fall than in the rest of Europe which dipped 62.8%. Many deals in the CEE were put on hold or withdrawn, and transaction activity almost came to a complete halt because the uncertainty caused by the pandemic “led many investors to retreat to their core markets and focus on familiar ground” C&W said in a statement.

One crumb of comfort has been drawn from the fact that the 2020 deals haul was considerably higher than during the Global Financial Crisis in 2009 when volumes fell to €209 million, although C&W points out that most (87.6%) of the last year’s deal volume actually comprised deals that had been struck before the outbreak of the pandemic.

Nevertheless, 2021 investor activity has already reached €140 million in closed deals.

“The decline in transaction activity was driven by a combination of factors, the most prominent one being the temporary lack of visibility on when and how the market will recover,” said Frederic Le Fichoux, head of hotel transactions, Continental Europe at Cushman & Wakefield. “Some owners may soon face financial challenges, especially as government subsidies taper off or their loans come to term. Similarly, on the investor side, significant capital has been raised, and this will need to be deployed sooner rather than later to deliver the required returns,” he added.  

C&W feels that the region’s hotel market remains robust, however. The average annual transaction volume over the last five years (2016-2020) reached €791 million, which is 2.7 times that which was achieved during the peak of the previous cycle (€296 million, 2002-2006). This reinforces the fact that the overall fundamentals of CEE’s investment market have grown stronger over the years, and are reflected in the increasing investor interest and activity in the region, the firm said.

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