5 March 2013 - The UK’s hotels market saw the most transaction activity during 2012 with a total volume of €1.4 billion, accounting for 38% of hotel volume in Europe.

European hotel transaction volume reached a total of approximately €5.6 billion in 2012, a decrease of 21% on the €7.1 billion recorded in 2011 highlighting the fact that investors in Europe’s hotel market are still being cautious over purchases.

The latest 2012 European Hotel Transactions report, published annually by HVS London, notes that activity during 2012 involved some 101 transactions (of more than €7.5 million per property) with 301 hotels and more than 39,000 rooms. Although total volume was above the 2009 trough of €2 billion, it remains below the 10 year average of €9.5 billion since 2002.

Activity during 2012 was strengthened by a number of major transactions, such as the sale of the Metropol Moscow for US$273 million (€218 million) on the single asset side and Host Hotels & Resort’s acquisition of the Quintet Portfolio, comprising four hotels in Paris and one in Amsterdam for €440 million on the portfolio side.

Report author Luis Grilo, analyst, HVS Hodges Ward Elliott, said: “In comparison with 12% in 2008, high-net-worth individuals have their increased acquisition activity, accounting for 24% of transaction volume in 2012. Private equity firms have decreased their activity with 7% in 2012 compared to 17% in 2008, a direct reflection of the lack of debt available to leverage acquisitions.”

Single asset transactions

In terms of single asset transactions in 2012, the hotel investment market was dominated by Hotel operators, high-net-worth individuals and real estate investors, which together accounted for 69% of total volume.

The UK was the most active market for single asset transactions with a total volume of almost €1.4 billion and some 33 hotels and more than 6,000 rooms sold. Despite a decrease in volume of 12% on 2011 the average price per room remained constant at €190,000. This is the result of more high-end assets changing hands in 2012 compared with the previous year.

A number of hotel development sites have also been sold in London, including the InterContinental Westminster and Hilton Bankside. In addition, the Odeon Site in Leicester Square was acquired by the Edwardian Group.

In France Union Investment acquired the 369-room Meliá Paris La Défense development for an undisclosed price. Bouygues Immobilier acquired the 617-room Pullman Paris Rive Gauche for €77 million and the 60-room Hotel Lancaster in Paris was sold by Spanish operator Hospes Hoteles to French hotelier Pierre Esnée for about €61 million.

Germany accounted for 9% of single asset transaction volume. Notable transactions included the Courtyard Düsseldorf Seestern for €15.5 million and the Suite Novotel Hamburg City for €18 million (€97,000 per room).

Portfolios and corporate activity

Portfolio investment painted a similar picture in 2012, with high-net-worth individuals, real estate investors and hotel operators accounting for a significant 65% of total volume. Total portfolio and corporate volume across Europe reached more than €2.2 billion, a 31% decrease on 2011 levels.

Notable transactions in the UK included the acquisition of six hotels from investment vehicle aAim by Principal Hayley for €238 million (£200 million).

Germany has been a particularly active market for portfolios. In April 2012, Invesco Real Estate acquired two adjoining properties in Berlin (Indigo Berlin and Holiday Inn Berlin) from Azure Property Group for €60 million (€152,000 per room). Additionally, Internos Real acquired two MGallery Hotels from Accor for a reported €44 million (€124,000 per room).

The most significant transaction of 2012 was Host Hotels & Resorts’ acquisition of the Quintet Portfolio, strengthening its presence in Paris and Amsterdam with the addition of five hotels from Goldman Sachs’ Whitehall Funds and Gengate for an aggregate price of €440 million.

“Surprisingly only 12% of the total transaction volume could be described as distressed selling,” commented HVS London managing director Charles Human.

“The main sellers of 2012 were real estate investors, hotel operators and high-net- worth individuals, which together made up 62% of transaction volume. Real estate investors, such as Unicor Management Co and ANF Immobilier, accounted for more than €1.2 billion. Government, banks and receiver company divestments accounted for 16% of transactions.

“Although a long way off the flood of distressed sales that has been hoped for by many for several years, there has been an increase recently in the volume of hotels coming to market, particularly out of insolvency. Buyer interest is expected to continue to focus on the main northern and western European markets, notably the UK, Germany and France,” he said.

2012 European Hotel Transactions, by Luis Grilo can be downloaded at
http://www.hvs.com/article/6232/2012-european-hotel-transactions/?campaign=email

About HVS
HVS is the world’s leading consulting and services organisation focused on the hotel, restaurant, shared ownership, gaming and leisure industries. Established in 1980, the company performs more than 2,000 assignments a year for virtually every major industry participant. Through a worldwide network of 30 offices staffed by 300 industry professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. For further information please visit www.hvs.com.