It’s time again for the International Hotel Investment Forum. Just one year ago, the headlines from this conference were: “'Confidently gloomy' at IHIF” and “Despite downturn, companies eye global reach.”
And it seems as though similar sentiment will reign again. There is uplifting talk of development leading into IHIF, but financing, performance and euro zone woes linger.
Deloitte reports today that based on data from STR Global, European hotel demand has experienced an upturn since October 2009, before pushing into positive territory in December 2009—up 4.2 percent. Results for January 2010 also show a 3.3-percent increase in the region against January 2009. Deloitte cautioned against a robust rebound, however.
“London is leading European hotels out of the recession,” said Alex Kyriakidis, global managing partner of Tourism Hospitality & Leisure at Deloitte. “Hoteliers there have been able to push up average room rates since November 2009 and could possibly achieve double-digit (revenue-per-available-room) growth this year.”
Recent STR Global numbers indicate Berlin reported the largest average daily rate increase for January 2010, up 8.1 percent to €82.11 (US$112.37), followed by London with a 7.2-percent increase to €125.60 (US$171.89).
Tel Aviv, Israel, experienced the largest occupancy increase, rising 47.9 percent to 62.2 percent. Four other markets reported occupancy increases of more than 10 percent: Frankfurt (+14.6 percent to 58.4 percent); Moscow (+11.6 percent to 43.3 percent); Athens, Greece (+10.6 percent to 42.3 percent); and Milan (+10.4 percent to 51.9 percent).
Transactions outlook
After an abysmal transaction volume of £6 billion (US$9.1 billion) in 2008, 2009 took the hotel investment community into an “age of austerity,” according to Elke Geieregger, senior associate at HVS London, speaking on the release of The HVS European Hotel Transactions 2009 report. European hotel investment activity fell further—by around 50 percent to just more than £3 billion (US$4.5 billion) in 2009.
“In general, the European transaction market is expected to remain under immense pressure for another 12 months or so, until confidence in hotel trading performance is restored, sellers start pricing their assets in line with market value, and banks send sustained signals of support for the hotel sector,” said Saurabh Chawla, associate director at HVS. “Our expectation is that hotel investments in 2010 will, at the very least, fare better than they did in 2009, with a more meaningful upturn occurring in 2011.”
Interestingly, the Irish Times reported last week that a £16-billion portfolio of loans will be transferred to Ireland’s National Asset Management Agency. Among the assets are three prominent London hotels: the Berkeley, Claridges and the Connaught, which are owned by Derek Quinlan's Maybourne Hotel Group, and five well-known Irish hotels: the Shelbourne, the K-Club and the Ritz-Carlton hotel in Wicklow; and the Radisson and G Hotel in Galway.
Later reports indicate NAMA will end up owning the debts and possibly the deeds of approximately 100 to 200 hotels by the time five covered institutions have transferred more than €80 billion (US$109.5 billion) worth of land and development-related loans to it.
Many are anxious to see how NAMA proceeds as a hotel owner. Will it close the hotels? Sell them? Employ a third-party operator in the meantime?
Coming soon
While these facts and figures already paint a picture of European hotel’s 2010 and beyond, the events this week should shed more light on the industry’s well being.
Today Ernst & Young is expected to release its annual “Global Hospitality Insights: Top thoughts for 2010.”
The report discusses some of the key issues that will be affecting the hotel sector in 2010, including difficulties in valuing hotel assets, frozen debt markets, fair value and consolidation, the status of acquisitions, IPOs, luxury accommodation and restructuring.
Should you not be in attendance, I’ll be providing updates from the conference via Twitter (@staceyhiggins) and stories on HotelNewsNow.com.