Domestic UK and regional European investors were responsible for this increase in activity, snapping up more than 62.1% and 10.8% of sales (over £10 million) respectively. While the European investors were active in the market, the US and Asian investors (once keen buyers) were not major players during 1999.  US investors accounted for 5% of total sales volume in 1999, whilst the representation of Asian investors was minimal. Major sales in London during 1999 included the Green Park Hotel Mayfair (£35.5 million), the Westbury (£68.3 million), the White House Hotel (£52 million) the Hilton International Regent�s Park (£70.2 million) and the Hotel Russell (£59 million).

Mr de Haast said that �Despite the slight softening in the trading market during 1999, investor interest is being sustained by the strategic importance of London as a hotel investment market and the positive economic outlook, open legal system and market transparency�. The Digest shows that London�s quality hotel market managed to bounce back from a relatively poor first six months in 1999 to realise a modest increase in room rate (1.2%) to £200.68. Hotel room yields in London remained flat for the year end, recovering from a 5.6% decline year-to-date April 1999.

The hotel investment market in London is expected to remain strong as both domestic and international owner operators clamber to acquire quality hotel assets in the city, given the limited quality stock offered to the market. Mr de Haast states that �a new investor type has emerged over the past 18 months, that of the UK institutional investment fund, which acquired several hotels during 1999 subject to leases with operating groups, ensuring a guaranteed level of rental income�. These investors should provide additional capital for hotel acquisitions during 2000. 

He adds that �debt finance should continue to be available for good quality assets supported by a strong brand/management team with a sound track record�.

Compared to London, the majority of the continental European hotel markets are highly illiquid, as they are in an earlier stage of the current investment cycle. Mr de Haast attributes this, in part, to the �lack of transparency and the low yield expectations of owners�, stating that �this is particularly true of Germany where investors are looking to purchase on current cash-flows, whilst owners are trying to sell on future market expectations or book values that were created in the early 1990s�. In addition, the complex legal and tax systems in many markets such as Italy, France and Spain have kept international investors at bay.  However, perhaps most importantly, it is the strong trading conditions being enjoyed in many European centres which has hindered investment activity. Owners currently prefer to retain their assets and maximise profit growth through trading.

The strongest performers of 1999 were Barcelona and Berlin, which realised an increase in room yield of 24.2% and 20.4% respectively during the year. These were followed by Cologne, Munich and Madrid which grew their room yield by 11.0%, 9.9% and 12.1% respectively. Mr de Haast stated that �many German markets are finally showing real signs of recovery, with most markets notching up two years of continuous growth, the first time we have witnessed this since Germany went into recession in the early 1990s�.

Continental Europe did see some merger and acquisition activity, mainly driven by US private investment funds. At the beginning of the year Westmont Hospitality announced its purchase of the Agip and Clarine chains in Italy comprising 2,953 rooms. Colony Capital, Blackstone and Accor joined forces to acquire the Vivendi portfolio for FF3.1 billion (£307 million) in June, whilst Sol Melia purchased a group of boutique hotels in Paris for FF 512 million (£49.7 million). Golden Tulip acquired the Servico portfolio in Belgium and the Netherlands for DFL208 million (£62.1 million).

The Digest Europe analyses all the latest trends in hotel investment, as well profiling the operating markets of 22 cities around Europe.