BLP launches its European Hotel Market Survey 2016
Hotel industry professionals are divided as to whether a ‘Brexit’ would have a positive or negative impact on UK hotels, according to the latest European Hotel Market Survey launched today (7 March 2016) by international law firm Berwin Leighton Paisner (BLP).
Karen Friebe, BLP Hotels Group Partner unveiled the results of the survey as Berlin’s annual International Hotel Investment Forum (IHIF) kicked off today, 7 March 2016.
This year’s survey shows that over half (54%) of hotel professionals who completed the survey believe that M&A activity and/or revenue per available room (RevPAR) would be adversely affected, should Britain leave the European Union.
London is again Europe’s strongest performer
This said, London was again named the strongest performer in Europe, showing the largest increase in RevPAR ahead of Berlin, Barcelona and Madrid in 2015. In addition, London is predicted to see the most M&A activity in 2016, with investors’ appetites for all assets showing no signs of slack despite rising prices. Berlin is seen as the second best location for value for assets, behind the UK capital.
Western Europe remains a safe haven for investors
The survey also reveals that 89% of investors increasingly value the benefits of hotels as an attractive real estate asset class, due to steady returns and low interest rates. However, almost three quarters of respondents (72%) do believe that hotels are perceived as ‘more risky’ than other types of commercial property investment. This is perhaps why global investors are expected to keep their sights set on Western Europe, with popular cities seen as a ‘safe haven’ for returns.
Are new disruptors taking market share?
While confidence is returning to the hotel sector, with over three-quarters (77%) predicting an increase in RevPAR across Europe in 2016, the sharing economy remains a concern among 53% of hotel industry professionals. Whilst non-traditional hospitality businesses continue to rise, with Airbnb now being valued at USD$25.5bn, posing a threat to sub-four star hotels, the brand is unlikely to take business away from European four and five start hotels in 2016.
Other key findings include:
- 55% believe that China will be the most active inward investor into Western Europe;
- Franchising will continue to be the most popular source of growth for hotel brands in 2016;
- Over half (53%) believe that banks will return as the most active debt providers in 2016, after several years of cutting their exposure post-2007.
Karen Friebe commented: ”Through working with a number of high profile clients, both on the investor side and with hotels themselves, we believe that 2016 will be a positive year overall for the industry. Our survey generally supports this view, but we are hearing notes of caution. Our experienced owner clients are emphasising that now is the time to proactively manage hotel assets and engage with the operators to ensure a decent return on capital. As one client quoted in the survey says, this is not the market for passive asset collectors.
“As well as the new legal challenges that the hotel market will face 2016 , namely the introduction of the EU Data Protection Regulation and the National Living Wage, there is added to the mix this year the potential impact of Brexit, alongside the continuing issues posed by competition from the OTAs and the rate parity discussion.
“Market consolidation is also a topic that is likely to remain in the spotlight throughout 2016 but the majority of our survey respondents did not feel that size is the only way to take on the might of the OTAs. It will be interesting to see how owners and operators continue to seek ways to respond to this challenge in the year ahead.”
European Hotel Market Survey 2016: Top Trends
- Over three-quarters (77%) believe that RevPAR will grow in Europe.
- London will see the most M&A activity, followed by Berlin and Madrid
- 89% think institutional investors value the benefits of hotels as an attractive real estate asset class.
- Over half (53%) believe that banks will be the most active debt providers in 2016.
- 69% believe that Western Europe will be the focus of the majority of global investment.
- Three-quarters (75%) expect to see more restructuring and refinancing of debt.
- 55% see China as the most active inward investor into Western Europe.
- Two-thirds (66%) do not believe that size is the only way to compete with online travel agencies.
To view the full report, please see the following link: www.blplaw.com/european-hotel-survey-2016