European hotel investment volumes have risen 42% year-on-year in Q3, with the sector now accounting for 9% (€16.1bn) of capital invested into real estate compared to 3% (€5.2bn) in 2007, according to CBRE’s Q3 2015 European Hotel Investment MarketView.
Luxury assets in capital cities have been targeted over the last 12 months by a growing number of institutional capital and Middle Eastern (28%) investors for the preservation of wealth and prestige.
Dominic Murray, head of cross-border transactions EMEA, CBRE Hotels, stated “Private equity funds have been recycling their capital and targeting opportunities in Southern Europe as they hunt for yield. With increasing competition to acquire assets in Spain and Italy driving up values, Greece could be the next target for opportunistic investors should they have confidence in economic and political stability going forward.”
Hotel profitability in Greece’s capital, Athens, has grown by +6% year-on-year for the 12 months to September 2015 due to decreasing payroll costs and stable inbound international travel. Currently there are two major barriers to this development; lack of product and debt, however, successful recapitalisation of the Greek banking sector will hopefully re-open the lending market.
Joe Stather, manager, hotel intelligence, EMEA, CBRE said, “Our Q3 figures demonstrate that low levels of liquidity in the sector is no longer presenting a barrier to the investment community when considering activity in this space. Stock availability has been a catalyst in the growth of hotel investment volumes, however allocation of capital into the space has ensured strong pricing and yield contraction against a backdrop of operator performance recovery.”
