BERLIN — Supply-demand dynamics for travel to Europe have been strong since the COVID-induced travel pauses earlier in the decade, and investors say that continues to drive capital to European hotels.
Speaking during the "Capital talks" session at the International Hospitality Investment Forum EMEA, Lauren Okada Young, managing director at Brookfield Asset Management's real estate group, said hotel investment appetite remains strong.
"We continue to see a lot of support for our investments in European hospitality because of the supply and demand fundamentals," she said. "We see very supply-constrained markets and diversified demand drivers across the space."
One thing that is changing, though, is an increasing appetite for investing in operating platforms in order to have greater influence over the performance of hotels, she said.
"A lot of what we've done is investing in operating businesses and trying to scale them to create a meaningful component of our return," she said.
Peter Werhahn, managing director of Blackstone's London-based real estate group, agreed, and noted that Mediterranean resorts continue to be viewed as safe bets for global investors.
"Europe is a pretty unique place, and that's why it's really become a magnet" for travelers and investors, he said. "We try to follow these sort of themes by doubling down on leisure and investing in experiences."
One thing that has expanded somewhat is the profile of investment groups looking to get into hospitality across Europe, and Werhahn noted Blackstone has seen more family offices and high-net-worth individuals backing their investments in the sector.
"That's been, from a firm perspective, a big growth area," he said.
Coley Brenan, hospitality advisor for Singapore sovereign wealth fund GIC, agreed that focusing in on the operational side of the business makes a big difference on how well European hotel investments perform.
"I think one of the things that's different today than a year ago in terms of the types of questions we're navigating really comes back to ... the operational real estate elements that are differentiated and really understanding those levers," he said. "And it's not just rooms, so the businesses have those diverse revenue streams and [you have to think] through where the exposure is different from the fundamental macro pieces."
Picking the right partners at the outset is key, he added.
"It's all about the operators," Brenan said. "It's about backing the right leadership teams and the right concepts."
David Fattal, founder and CEO of Fattal Group, said elevating hotel investments through strong operations is core to how his business thrives. He noted Fattal Group strives for a balance of a third of its hotel portfolio owned, a third under management agreements and a third leased.
"We think we are experts in hotels. We only do hotels, and we only do Europe," he said. "So we are very focused."
He noted for each asset "the major thing is to run the operation successfully."
"The major key is improving the results, finding the potential and improving the results," Fattal said.
Werhahn noted there's an important balance to be struck as an investor where you're active in asset management but not "second guessing our management teams."
"They're clearly experts in the field, but oftentimes it's just being someone to bounce ideas off of," he said. "It's us bringing a new perspective from" other asset classes.
Okada Young said success in managing hotels begins with selecting the "right assets of the right quality in the right location" and continues to selecting the right operating partners then giving them the platform to succeed.
"If I look back at all the investments that we've made over the last few years that have tended to be more successful, they're where we've been working hand in hand with our operating partner or management team to pivot our strategy and react to change proactively and very quickly," she said.