Hotel transaction volumes reaching pre-recession levels

By Luke Nicholls

- Last updated on GMT

Related tags: Debt, Finance

The increase in sales volume has been driven by more readily available debt financing from both traditional and new sources of debt
The increase in sales volume has been driven by more readily available debt financing from both traditional and new sources of debt
With three-quarters of the year now complete, the European hotel industry is still on track to record the highest level of transactional activity since 2007 – is this a sign that buyer confidence has returned? 

According to the latest European Transaction Bulletin from HVS London, total sales for 2013 are expected to surpass the €7bn mark hit in 2011, with some big UK portfolio sales dominating the market. This has, in part, been driven by more readily available debt financing from both traditional and new sources of debt.

ADIA’s purchase of 42 Marriott hotels and Starwood Capital’s acquisition of 22 Principal Hayley hotels in the UK – both in the first quarter –contributed to hotel sales across Europe reaching €6.5bn in sales for the first nine months of the year.

Total sales for 2013 are now expected to surpass the €7bn recorded in 2011, although this is still being far below the €15-€20bn peak recorded in each of the ‘boom years’ of 2005, 2006 and 2007, when the easy availability of substantial debt finance led to an unprecedented level of major portfolio transactions.

Huge buyer interest

What this increase in sales activity actually means for the market is open to debate. Russell Kett, managing director of HVS London, says there must first be a distinction between the markets in London and Provincial locations.

Kett told BigHospitality: “There is huge buyer interest for acquiring hotels in London and much less so for provincial UK. We should not overlook the portfolio interest that there has been for hotel groups in provincial UK this year, however.

“It’s still much harder for individual buyers to secure debt finance for hotels outside London, so one-off purchases of provincial hotels are somewhat less likely for the time being. This should ease up in the coming year or two if the debt providers start to get used to saying ‘yes’ more often than not. 

“Business levels in provincial hotels are showing signs of sporadic improvement, but it will also take a while before we see pre-recession levels working their way through to city-wide average performances.”

Due to the relative shortage of stock currently available for acquisition, Q4 in 2013 is expected to be well below the level of transactions seen in Q4 2012, when almost €2bn of hotel sales closed in the final quarter.

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