Summer 2022 has seen a return to travel around the world, with leisure travelers eager to feast on foreign sights and a sudden explosion in accents in sought-after destinations such as London, Paris and anywhere sporting blue seas and relaxing views.
One of the biggest movements has been travelers from the U.S., who have been leaping on flights to Europe, yearning for culture, sun and gourmet dining but also drawn to the bargains to be had with a strong U.S. dollar.
But it’s not just holidaymakers eager to enjoy much-delayed holidays and get a change of view. Investors from the U.S. have been eyeing Europe with growing enthusiasm as the market continues to mature and as they are able to get more for their money.
Investment in hotels in Europe has bounced back, in general, as a result of a resurgence in travel.
A normal environment means a more global view of investment in Europe.
According to business advisory Savills, 16.1 billion euros ($17.1 billion) was invested into the European hotel sector in 2021, a 61% year-over-year increase. This was driven by an increase in transactional activity across several major European markets, namely Spain, Italy and the United Kingdom, where volumes were up 211%, 122% and 84%, respectively.
The U.S. hotel sector has led the way in terms of branding, splitting ownership and operations and inserting experts such as asset managers into the hotel stack for several decades, but the European market has long been fragmented and led by independent hotels.
Independent hotels inspire the rest of the sector, yes, but they can be off-putting to overseas investors with the exception of those with a taste for risk or that possess hands-on expertise.
This is now changing. Blackstone led the way in Southern Europe, in particular in Spain, and it has only built on this.
At the end of last year, Blackstone's platform Hotel Investment Partners agreed on a joint venture for hotel firm Mangia’s six-property portfolio in Italy, its first move in the country.
That deal extended its position as the largest owner of resort hotels in Southern Europe, which now includes 71 properties and approximately 21,000 rooms.
At the same time, Starwood Capital Group made its first foray into Spain, with an agreement to acquire the 420-room Iberostar Las Dalias in Tenerife, Canary Islands, from Iberostar Group for a reported price of approximately 100 million euros.
Spain continues to be attractive, with the hotel joint venture between Stoneweg and Bain Capital adding to its existing portfolio of sites in Marbella and Barcelona.
So far this year, the partnership has added the 267-room Hotel Miguel Ángel, Madrid, for 200 million euros; and 168-room Palladium Hotel Don Carlos, for approximately 50 million euros.
Canadian firm Brookfield Asset Management has also shown interest in the Palladium portfolio. Brookfield acquired the 336-room Palladium Costa del Sol hotel, Málaga, with the speculated purchase price near 50 million euros.
KSL Capital Partners has been active across the region, too. It acquired a majority stake in Dutch group Eden Hotels, and it also acquired a majority stake in the UK group The Pig Hotels.
Investors are looking at the hotel sector not only as an opportunity to enjoy assets that generate income and hopefully grow in value, but also act as a hedge against inflation, something that is front of mind in the current environment.
It is not just investment in assets.
At the beginning of September, Wyndham Hotels & Resorts acquired the Vienna House brand for 44 million euros, adding an upscale and midscale portfolio of approximately 40 hotels and more than 6,000 rooms all in Europe. The acquisition of the brand added 28 hotels in Germany alone.
Investors from the U.S. are reassured by an approach in European hotels that they can recognize.
This is a view that appreciates the complexity of operations and seeks to install experts at every turn, moving away from the traditional owner-operator model that, while perfectly valid for single sites and small groups, does not always allow for the platform-building aspirations of the current crop of U.S. investors.
Asset managers can help ensure that all parties work together and have their interests served. Incomers may need specialist advice that can only come from asset managers, from those people who are at the heart of the operation.
Having a track record across several different properties can help all hotels, not just those under immediate pressure, find a profitable way out toward a more normal environment.
Alex Sogno is CEO of business advisory Global Asset Solutions.
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